Address
A unique string of letters and numbers to and from which cryptocurrency is sent. An address—which is usually a hashed version of a public key—functions like an email address.
Glossary & Acronyms
Short answer. A crypto glossary is a plain English list of the words you’ll meet when you invest in crypto, from wallets and private keys through to DeFi, NFTs and short forms like DCA and DYOR. Search for a term below, or use the Acronyms tab for short forms.
Written by the Collective Shift team. Collective Shift was founded in Melbourne in 2020 by TEDx speaker Ben Simpson, and our guides follow the SHIFT Method: Set your plan in writing; Hold Bitcoin as your core; Invest in on-chain businesses with real revenue; Filter every coin before you buy; Take profits on the way up. General information only, not financial advice.
Last updated 2 November 2026
Start here: key definitions
New to crypto? These are the terms we explain in the most depth, each with a short answer first, worked examples and common questions.
Definition
Total value of the coins in circulation, and why to read it next to FDV.
Definition
The payment that keeps perpetual futures in line with spot, and what it says about leverage.
Definition
The secret that controls your crypto, and simple habits to keep it safe.
Definition
The 12 or 24 word backup that restores a wallet, and how to store it.
Definition
How a shared, tamper resistant record lets value move without a bank.
Definition
Earning rewards for helping secure a proof of stake network, plus the risks and tax.
Guide
How a token's supply, unlocks and incentives work, and how to check them.
Guide
The average price every coin last moved at, a key on-chain cost basis.
Guide
The difference between online and offline storage, and when each suits.
Guide
What people mean by altseason and the signals used to spot it.
Guide
200 and 50 week moving averages
Two long-term trend lines Bitcoin investors watch through the cycle.
Our crypto glossary and acronyms page is loaded with terms you’ll likely encounter while navigating the crypto and blockchain ecosystem. Be sure to keep it handy along your journey!
A
Airdrop
A distribution of cryptocurrencies to a pre-defined set of blockchain addresses that’s generally free of charge. Airdrops can generate awareness of the cryptocurrency being airdropped, helping drive adoption. (Learn about how airdrops are taxed in this Beginner’s Course topic.)
Alpha
The active return of an investment relative to the return of a suitable benchmark index.
Alphanumeric
Containing both letters and numbers.
Altcoin
A cryptocurrency that functions similarly to—but not exactly the same as—bitcoin. Typically, founders will detail in their whitepaper how their project’s altcoin is distinct from bitcoin. Altcoins are sometimes called ‘alts’ for short.
Appchain
Short for application-specific blockchains, appchains are blockchains that are customised to operate a single app.
Automated market maker (AMM)
Automated market maker (AMM): An automated market maker (AMM) is a smart contract that lets you swap tokens against a pool of liquidity instead of matching with another trader. A formula sets the price from the ratio of tokens in the pool, so trades can happen at any time without an order book.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How an AMM sets prices
Many AMMs use a constant product formula: the quantity of token A multiplied by the quantity of token B stays the same. When you buy token A, you add token B to the pool and remove token A, so A becomes scarcer in the pool and its price rises. Larger trades move the ratio more, which is called slippage.
Liquidity providers and impermanent loss
Liquidity providers deposit pairs of tokens into the pool and earn a share of trading fees. If the prices of the two tokens move apart, providers can end up with less value than if they had simply held the tokens. This is known as impermanent loss.
AMM vs order book
An order book matches buy and sell orders placed at chosen prices, as on most centralised exchanges. An AMM has no orders; traders swap against the pool and the formula sets the price.
Frequently asked questions
Who sets the price on an AMM?
The pool formula does, based on the balance of tokens. Arbitrage traders keep it close to prices on other markets.
Is providing liquidity to an AMM risk free?
No. Providers face impermanent loss, smart contract risk and token price risk.
Related guides
B
Bear market
A sustained decrease in prices encouraging a negative outlook on the market.
BEP-2
The technical standard used to issue tokens on Binance Chain (not to be confused with Binance Smart Chain).
BEP-20
The technical standard used to issue tokens on Binance Smart Chain (not to be confused with Binance Chain).
Beta
A measure of how a given asset moves, on average, when the overall market increases or decreases.
Bitcoin
Bitcoin: Bitcoin is a decentralised digital currency and the peer-to-peer network that runs it. Thousands of independent nodes keep a shared ledger of every transaction, new blocks are added through proof of work mining, and the total supply is capped at 21 million bitcoin.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How the Bitcoin network works
Miners compete to add the next block of transactions by solving a proof of work puzzle, and the winner earns newly issued bitcoin plus transaction fees. A new block is found roughly every ten minutes. The block reward halves about every four years, which is why new supply keeps shrinking until the 21 million cap is reached.
What is a UTXO?
Bitcoin does not track account balances. It tracks unspent transaction outputs (UTXOs), which are chunks of bitcoin you have received and not yet spent. When you send bitcoin, your wallet uses one or more UTXOs as inputs and creates new outputs: one to the recipient and, usually, one returning change to you. Your balance is the sum of your UTXOs.
Bitcoin vs Ethereum
Bitcoin is designed mainly as a scarce store of value and payment network. Ethereum is a programmable blockchain that runs smart contracts and applications, uses proof of stake and has no fixed supply cap. Many investors hold both because they do different jobs.
Frequently asked questions
Is Bitcoin the same as bitcoin?
Bitcoin with a capital B usually means the network, and bitcoin or BTC means the currency that moves on it.
Can more than 21 million bitcoin be created?
Not under the current rules. The cap is built into the protocol and changing it would need the network to agree.
Related guides
Block
A discrete group of valid transaction data that is cryptographically tied to the previous block; collectively forming a chain of blocks (i.e., a blockchain).
Block explorer
Block explorer: A block explorer is a website or app that lets you search a blockchain's public record. You can look up a transaction ID, a wallet address or a block and see amounts, fees, confirmations and timestamps. Etherscan for Ethereum and mempool.space for Bitcoin are common examples.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a block explorer works
The explorer runs or connects to nodes on the network, reads every new block and indexes the data in a searchable database. Because public blockchains are transparent, anyone can view the same records without an account.
What you can check
- Whether a transaction is pending or confirmed, and how many confirmations it has.
- The fee paid and the addresses involved.
- The balance and history of any public address.
- Token contracts and holder lists on smart contract networks.
Frequently asked questions
Can a block explorer show who owns an address?
Not directly. Addresses are pseudonymous, although activity can sometimes be linked to people or exchanges.
Is it safe to paste my address into a block explorer?
Yes, your address is public. Never enter a private key or seed phrase.
Related guides
Block height
The number of blocks that exist between a given block and the genesis block. The eighth block to be added to a given blockchain will have a block height of seven, for example.
Block reward
Block reward: A block reward is what a blockchain pays the miner or validator who adds a new block. It usually has two parts: newly created coins, often called the block subsidy, and the transaction fees from the transactions in that block. Block rewards pay for network security and are how many cryptocurrencies release new supply.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
The two parts of a block reward
The subsidy is new coins written into existence by the protocol. The fees come from users who paid to have their transactions included. On Bitcoin, the winning miner claims both in a special first transaction in the block, as the Bitcoin developer documentation explains. When the network is busy, fees can make up a larger share of the reward.
How the Bitcoin block reward changes
Bitcoin cuts the subsidy in half every 210,000 blocks, roughly every four years, in an event called the halving. The subsidy started at 50 BTC in 2009 and has been 3.125 BTC per block since the April 2024 halving. This schedule is why the total supply can never pass 21 million coins.
Block rewards on proof of stake networks
On proof of stake chains such as Ethereum, validators earn rewards for proposing and attesting to blocks instead of solving puzzles. Issuance rules differ between networks, and some burn part of each fee, so the net change in supply depends on network activity, not a fixed timetable.
Why investors watch block rewards
Block rewards set how much new supply reaches the market and how much miners or validators earn. A falling subsidy squeezes less efficient Bitcoin miners, which can show up in mining activity and hash rate. Our Bitcoin halving explainer covers how investors think about the four-year schedule. Past halvings are not a guarantee of future price moves.
Frequently asked questions
What is the current Bitcoin block reward?
The Bitcoin block subsidy has been 3.125 BTC per block since the April 2024 halving, plus the transaction fees in each block.
What happens when all bitcoin is mined?
The subsidy is expected to reach zero around the year 2140. After that, miners would be paid by transaction fees alone.
Is a block reward the same as a staking reward?
They are related. Both pay for securing a network. Block reward is the usual term for what miners earn on proof of work chains, while staking rewards go to validators and the people who stake with them.
Related guides
Blockchain
Blockchain: A blockchain is a shared digital record of transactions that is copied across thousands of independent computers. New transactions are grouped into blocks, and each block is cryptographically linked to the one before it, so past records cannot be quietly changed. This lets people transfer value without relying on a bank or central operator.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a blockchain works
Computers on the network, called nodes, each keep a full copy of the record. When someone sends a transaction, nodes check it against the rules. Validators then bundle valid transactions into a block and add it to the chain using a consensus method such as proof of work (Bitcoin) or proof of stake (Ethereum).
Blockchain vs cryptocurrency
The blockchain is the network and its record. A cryptocurrency is the native asset used on that network, for example BTC on Bitcoin or ETH on Ethereum, which pays transaction fees and rewards the people securing it. Many other tokens can also live on a single blockchain.
Why the design matters to investors
- Transparency: anyone can inspect transactions, which is what makes on-chain analysis possible.
- Security: rewriting history would require controlling a large share of the network.
- Trade-offs: networks balance speed, cost and decentralisation differently, which shapes how they are used.
How Collective Shift uses blockchain data
Because every transaction is public, our research team reads blockchain data directly, such as holder behaviour and supply held at a loss, rather than relying only on price charts. That is the foundation of the on-chain metrics we teach members.
Frequently asked questions
Is blockchain the same as Bitcoin?
No. Bitcoin was the first blockchain and its native coin. Today there are many blockchains, such as Ethereum and Solana, each with its own design.
Can a blockchain be hacked?
Large established blockchains have proven very hard to attack directly. Most losses come from exchanges, apps or stolen keys rather than the underlying chain.
Who controls a blockchain?
Public blockchains are run by independent node operators and validators around the world, following open-source rules that no single party can change alone.
Related guides
Blockspace
The limited amount of data that can be stored in a block on the blockchain. Sometimes, blockspace is used interchangeably with block size and block weight.
Bond
A type of debt security which effectively represents an IOU. Bonds are typically issued by governments and corporations when they want to raise money. (Head to What Are Investment Bonds & How Do I Buy Them? for more on bonds.)
Bridges
Blockchain bridges help users transfer tokens between different blockchains.
Broker
Crypto broker: A crypto broker is a service that buys and sells crypto for you at a quoted price, usually from its own inventory, rather than matching you with other traders. Brokers are often simpler to use, and their cost is built into the spread between the buy and sell price as well as any stated fee.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a crypto broker works
You choose a coin and an amount, the broker quotes a price and the trade happens instantly at that price. Behind the scenes the broker sources liquidity from exchanges or market makers and adds a margin. Many Australian apps that offer instant buy work this way.
Broker vs exchange
On an exchange you place orders on an order book and trade with other users at market prices, often with lower costs but a more complex screen. With a broker you trade with the platform itself at its quoted price. Comparing the quoted price with the live market price shows the real spread you pay.
Frequently asked questions
Is a broker more expensive than an exchange?
Often, because of the spread, although it depends on the platform and trade size. Compare the total cost, not only the stated fee.
Do brokers hold my crypto?
Usually yes, as a custodian, unless you withdraw it to your own wallet.
Related guides
BUIDL
A deliberate misspelling of ‘build’, this term is essentially a reminder to focus on improving the quality of tech and projects occupying the space.
Bull market
A sustained increase in prices encouraging a positive outlook on the market.
Byte
A unit of digital information. Typically, there are 8 bits in a byte. (A bit is a basic unit of information in computing and digital communications. It’s a portmanteau of ‘binary digit’.)
C
Cantillon Effect
An effect that’s described as a change in relative prices resulting form a change in money supply.
Confirmation time
The amount of time it takes for an unconfirmed cryptocurrency transaction to be included into the blockchain by miners. Transaction fee size can greatly affect confirmation time.
Contract For Difference (CFD)
A CFD is a broker-client agreement to pay the difference between a security’s opening and closing price. CFDs are derivatives. So, when you buy or sell a CFD, you are not buying or selling the underlying asset.
Cryptocurrency
Cryptocurrency: A cryptocurrency is a digital asset recorded on a blockchain and secured by cryptography. There is no central bank or company keeping the ledger. Ownership is proven with private keys, and transactions are confirmed by the network itself rather than a middleman.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How cryptocurrency works
Each transaction is signed with the sender’s private key and broadcast to the network. Nodes check it, and it is added to a block through the network’s consensus method, such as proof of work for Bitcoin or proof of stake for Ethereum. Once confirmed, the record is very hard to change.
Coins vs tokens
A coin is native to its own blockchain, such as bitcoin on Bitcoin or ether on Ethereum, and is usually used to pay network fees. A token is created by a smart contract on an existing blockchain, such as a stablecoin or a governance token issued on Ethereum.
Where cryptocurrency is stored
Crypto never leaves the blockchain. What you store is the private key, in a crypto wallet. On an exchange, the exchange holds the keys for you; in a self-custody wallet, you hold them yourself.
Frequently asked questions
Is cryptocurrency the same as blockchain?
No. A blockchain is the ledger, and a cryptocurrency is an asset recorded on it.
Is cryptocurrency legal in Australia?
Yes. Buying and holding crypto is legal, exchanges register with AUSTRAC, and the ATO treats crypto as an asset for capital gains tax.
Related guides
Cryptography
The practice and study of encrypting and decrypting information through complex mathematics Cryptography is a significant component of blockchain technology.
Currency
A kind of money and medium of exchange. The most common type of currency is fiat currency.
D
DAO
DAO: A DAO, short for decentralised autonomous organisation, is a group that uses blockchain-based rules and token-holder votes to make decisions instead of a traditional board. Smart contracts can hold funds and enforce the outcomes of those votes. In practice, many DAOs still rely on core contributors to write proposals and run day-to-day work.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a DAO works
Ethereum’s DAO overview describes DAOs as internet-native organisations that pool resources and vote on how to use them. Members usually hold a governance token or voting share. A proposal is posted on chain or through a linked voting tool, token holders vote, and if it passes, a smart contract can move funds or change parameters without one person signing a bank transfer.
What DAOs typically control
Common examples include protocol treasuries, fee switches, grant programs and upgrades to DeFi apps. Some DAOs govern media collectives or investment clubs. The on-chain part is often the vault and the voting record. Off-chain work such as hiring, legal structure and communications still happens through people and companies in most cases.
Limits and risks
Token voting can concentrate power if a few wallets hold large shares. Low turnout lets active minorities pass proposals. Smart contract bugs can freeze or drain a treasury. Some DAOs have ambiguous legal standing depending on the country. A vote that looks decentralised on a dashboard can still be steered by the team that writes the options voters see.
What it means for token holders
Holding a governance token does not automatically mean influence, income or legal membership. Read what the token can actually vote on, whether the treasury is on chain, and who can pause or upgrade the contracts. Our research process treats governance design as part of tokenomics review, not as a reason to buy on its own. This is general education, not advice.
Frequently asked questions
What does DAO stand for?
Decentralised autonomous organisation. The usual idea is shared ownership and rules enforced partly by smart contracts rather than by a single company board.
Do I need a token to join a DAO?
Most protocol DAOs weight votes by tokens. Some communities use other membership rules, but token voting is the pattern you will see most often in DeFi.
Are DAOs fully autonomous?
Rarely in the everyday sense. Contracts can automate execution after a vote, but people still draft proposals, build software and handle anything the contracts cannot do.
Related guides
Dapp
Dapp: A dapp, short for decentralised application, is an app whose core logic runs on a blockchain through smart contracts instead of on one company’s servers. You usually use a dapp through a website connected to your own crypto wallet. Decentralised exchanges, lending apps and NFT marketplaces are common examples.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a dapp works
A dapp has two layers. The back end is one or more smart contracts on a blockchain that hold funds and enforce the rules. The front end is a normal website or app that lets you read the contracts and send transactions. Ethereum’s documentation on dapps notes that because the back end is on a public network, anyone can inspect it and it keeps running even if the website goes down.
Common types of dapps
Decentralised exchanges let you swap tokens from your own wallet, often using an automated market maker. Lending apps let you deposit crypto to earn interest or borrow against it. Others include NFT marketplaces, games and governance tools. Together, financial dapps make up most of DeFi.
Dapp risks to understand
Using a dapp usually means approving a smart contract to move a token from your wallet. If that contract has a bug or is malicious, those approvals can be used to drain funds. Fake front ends that copy a real dapp’s website are a common scam. Many dapps also depend on oracles for prices and can have admin keys that let a team change the rules.
Safer habits when using dapps
Type the address yourself or use a saved bookmark, read what your wallet asks you to sign, and approve only the amount you need. Our member resource library includes tools such as Revoke.cash to review and remove old token approvals. Keeping long-term holdings in a separate wallet that never connects to dapps limits the damage if something goes wrong.
Frequently asked questions
Is a dapp the same as a crypto app on my phone?
Not always. An exchange app run by a company is a centralised service. A dapp’s core rules run on a blockchain, and you keep control of your funds in your own wallet.
Do I need a wallet to use a dapp?
Yes. Dapps connect to a self-custody wallet so you can sign transactions. The dapp should never ask for your seed phrase.
Are dapps safe?
They carry real risks, including smart contract bugs, fake websites and token approval exploits. Audits help but do not remove risk.
Related guides
DeFi
DeFi: DeFi, short for decentralised finance, is financial services such as trading, lending and borrowing that run on smart contracts on public blockchains instead of through banks or brokers. Anyone with a self-custody wallet can use them, and the code, rather than a company, holds and moves the funds.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How DeFi works
DeFi apps are sets of smart contracts, mostly on Ethereum and similar networks. You connect your wallet, approve the contract and transact directly. Common examples are decentralised exchanges that use automated market makers, lending markets that set rates by supply and demand, and on-chain options and perpetuals platforms.
Risks to understand
Smart contracts can contain bugs that are exploited, token prices can be volatile, and some projects are less decentralised than they claim. Approving the wrong contract can drain a wallet. Using well audited protocols and small test amounts first reduces, but does not remove, these risks.
Frequently asked questions
Is DeFi the same as crypto?
No. Crypto is the asset. DeFi is the set of financial apps that run on blockchains using those assets.
What is a DeFi options platform?
It is a protocol that lets users buy or sell options contracts on-chain, with collateral and settlement handled by smart contracts.
Related guides
Deflation
A decrease in general price levels throughout an economy. Deflation is the opposite of inflation, and is different from disinflation.
Demurrage
Also referred to as a carrying cost of money, demurrage is a term that describes the cost associated with owning or holding currency over a given period.
Derivative
A security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between at least two parties. Common forms of derivatives are futures, forwards, options, and swaps.
Disinflation
A decrease in the rate of inflation. Disinflation is different from inflation and deflation in that it refers to the rate of change in the rate of inflation.
Dollar-cost average (DCA)
An investment strategy of spreading out asset purchases by buying at regular intervals and in roughly equal amounts.
E
ERC-20
The technical standard used to issue tokens on Ethereum.
Ethereum
Ethereum: Ethereum is a programmable blockchain that runs smart contracts, code that executes automatically on the network. Its native coin, ether (ETH), pays the transaction fees known as gas. Ethereum is secured by proof of stake and is the base layer for much of DeFi, stablecoins and NFTs.
By Matt Willemsen, Director of Research. Reviewed by Ben Simpson. Updated November 2026. General education only, not financial advice.
How Ethereum works
Developers deploy smart contracts to Ethereum, and users interact with them by sending transactions that pay gas in ETH. Each transaction changes the shared state of the network, such as token balances or the result of a trade, and every node checks the result. Layer 2 networks process transactions more cheaply and settle back to Ethereum for security.
Proof of stake and staking
Ethereum moved from proof of work to proof of stake in September 2022, an upgrade known as the Merge. Validators lock up ETH as collateral, propose and attest to blocks, and earn rewards. Validators that act dishonestly can have part of their stake taken away, which is called slashing. Running your own validator needs 32 ETH, and smaller holders can stake through pools, liquid staking tokens or an exchange.
How ETH fees and supply work
Every transaction pays a base fee plus an optional tip to the validator. Since an upgrade in 2021, the base fee is burned, which removes that ETH from circulation. New ETH is issued to validators as rewards. Whether total supply grows or shrinks over a period depends on how much activity there is on the network, so ETH has no fixed supply cap.
How Ethereum relates to Bitcoin
Both are public blockchains, but they are built for different jobs. Bitcoin focuses on being a scarce store of value with a fixed 21 million supply and proof of work. Ethereum is a general purpose platform for applications. Many investors hold both because they do different things in a portfolio.
Frequently asked questions
Is ether the same as Ethereum?
Ethereum is the network and ether (ETH) is its native coin.
Can I stake ether?
Yes. You can run a validator with 32 ETH, or stake smaller amounts through pools, liquid staking or an exchange, each with its own risks.
What is gas on Ethereum?
Gas is the unit that measures how much computing work a transaction needs. You pay for it in ETH, and fees rise when the network is busy.
What is a layer 2?
A layer 2 is a separate network that bundles many transactions together and posts the result back to Ethereum, which lowers fees for users.
Related guides
Exchange
Crypto exchange: A crypto exchange is a platform where you buy, sell and trade cryptocurrencies, either for Australian dollars or for other crypto. Centralised exchanges are run by a company that holds customer funds, while decentralised exchanges let you trade from your own wallet using smart contracts.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Centralised vs decentralised exchanges
A centralised exchange (CEX) holds your funds in custody, matches orders on an order book and usually requires identity checks. In Australia, exchanges must register with AUSTRAC. A decentralised exchange (DEX) runs on a blockchain: you connect a self-custody wallet and trade against liquidity pools or on-chain order books, keeping control of your keys but taking on smart contract risk.
Exchange vs broker
On an exchange you trade with other users at market prices through an order book. A broker sells you crypto from its own inventory at a quoted price, often simpler to use, with the cost built into the spread between the buy and sell price. Checking the spread as well as the stated fee shows what you really pay.
Frequently asked questions
Is a DEX safer than a centralised exchange?
It removes the risk of the exchange holding your funds, but adds smart contract and user error risk. Each suits different needs.
Do I need to move crypto off an exchange?
Many investors move long-term holdings to a wallet they control so they hold their own keys.
Related guides
Exchange-traded fund (ETF)
An investment fund that can be traded on a stock exchange just like listed company shares. There are ETFs based on market sectors, asset classes, market caps, and foreign markets.
F
Fiat currency
Money that has no intrinsic value and is declared legal tender by a government. Examples of fiat currencies include the U.S. dollar, Japanese yen, and Australian dollar.
FOMO
An acronym for ‘fear of missing out’, FOMO refers to the anxiety that one feels when they believe they’re missing out on a potentially lucrative investment or trade opportunity.
FUD
Short for fear, uncertainty, and doubt, FUD refers to any baseless, negative information that is intentionally spread by those seeking to gain—often financially—from FUD-induced hysteria.
Fundamental analysis
The process of looking at a company or cryptocurrency at the most fundamental financial level.
Funding rate
Funding rate: A funding rate is a small periodic payment between traders holding long and short positions in perpetual futures. When the futures price sits above the spot price the rate is positive and longs pay shorts; when it sits below, shorts pay longs. It keeps perpetual contracts anchored to the spot market.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
What do funding rate, basis, open interest and mark price mean?
The funding rate is a regular payment between long and short traders on perpetual futures. Basis is the gap between a futures price and the spot price. Open interest is the total value of futures contracts still open. Mark price is the fair price an exchange uses to value positions and trigger liquidations.
Why perpetual futures need a funding rate
Perpetual futures never expire, so there is no settlement date to pull their price back to the real market. The funding rate does that job. Paying the crowded side of the trade encourages traders to take the other side, which nudges the contract price back toward spot.
How often funding is paid
Most large exchanges settle funding every eight hours, although some use shorter intervals. You only pay or receive it if you hold a position at the settlement time, and the amount is a percentage of your position size, not your margin.
Reading the funding rate as a sentiment signal
Because funding shows which side is paying to stay in a trade, it works as a sentiment gauge. Persistently high positive funding often means leverage is building on the long side, which can leave the market exposed to a sharp drop if those positions are forced to close. Deeply negative funding can signal the opposite. It is one input, read alongside open interest and on-chain data, never a signal on its own.
Why long-term investors still watch it
Collective Shift members invest rather than trade with leverage, but funding is still useful context. Extreme readings help explain sudden liquidation-driven moves, which makes it easier to stay calm and stick to a plan when prices swing.
Frequently asked questions
Do I pay funding if I just buy Bitcoin on an exchange?
No. Funding only applies to perpetual futures positions. Buying and holding spot crypto has no funding payments.
Is a high funding rate bullish or bearish?
It shows that most traders are positioned long and paying for it. That reflects bullish sentiment, but crowded leverage can also make a market more fragile.
Where can I see funding rates?
Derivatives exchanges publish their current rate on each contract page, and analytics sites such as CoinGlass aggregate rates across exchanges.
Related guides
Futures
A type of derivative contract that represents a binding agreement to buy or sell a given cryptocurrency at a specified price and date. Upon expiration, futures are either cash-settled or physically delivered.
G
Gas
Gas: Gas is the unit that measures how much computing work a transaction or smart contract action needs on Ethereum. You pay for it in ETH: the fee is the gas used multiplied by the price per unit, quoted in gwei. Complex actions use more gas, and prices rise when the network is busy.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Gas units vs gas price
A simple ETH transfer uses 21,000 gas units, while a token swap or NFT mint uses more. The gas price is set per unit in gwei, one billionth of one ether. Your wallet estimates both and shows the total before you confirm.
Base fee and priority fee
On Ethereum, each fee has a base fee, set by the network from how full recent blocks were and then burned, plus an optional priority fee, or tip, paid to the validator. Any amount below the maximum fee you set is refunded.
Why gas exists
Gas pays validators for processing transactions and stops anyone from clogging the network with endless computations, because every step has a cost. If a transaction runs out of gas it fails, and the gas used up to that point is still spent.
Frequently asked questions
Is gas the same as a gas fee?
Gas is the unit of work. The gas fee is what you pay: the gas used multiplied by the gas price.
How can I pay less gas?
Transact when the network is quieter, or use a layer 2 network for smaller, frequent transactions.
Related guides
Genesis block
The first block in a blockchain. Because its block height is always equal to zero, the genesis block is also referred to as ‘block zero’.
Governance
Governance refers to the processes of governing a given system. In the crypto space, governance describes the mechanisms through which decisions are made on key risk parameters, proposed improvements and other matters.
Gwei
Gwei: Gwei is a unit of ether used to quote gas prices on Ethereum and similar networks. One gwei is one billionth of one ETH, or one billion wei. When your wallet shows a gas price of 20 gwei, it is pricing each unit of gas in that tiny slice of ETH so the total fee is easy to compare.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Wei, gwei and ETH
Ether can be split into very small units. The smallest is wei. One ETH equals 10^18 wei. Gwei, short for giga-wei, equals 10^9 wei, which is 10^-9 ETH. Ethereum’s gas documentation uses gwei because whole-ETH gas prices would be awkward decimals, while wei would be huge whole numbers.
How gwei shows up in gas fees
Your total fee is roughly gas used multiplied by the price per unit of gas, quoted in gwei. A simple transfer uses a fixed amount of gas units. A token swap or smart contract call uses more. On Ethereum today the price usually has a base fee set by the network plus an optional tip. Wallets multiply these together and show an estimated total in ETH and in your local currency.
Reading a wallet quote
If a transaction uses 21,000 gas and the price is 30 gwei, the fee is 21,000 x 30 = 630,000 gwei, which is 0.00063 ETH. During busy periods the gwei price rises so users compete for block space. During quiet periods it falls. Layer 2 networks often show much lower gwei-style fees because they batch work before settling on Ethereum.
Gwei vs the gas glossary
This page is about the unit. Our gas meaning page covers how gas units, base fees and tips work together, and the gas fees guide walks through paying less in practice. As of November 2026, almost every Ethereum wallet still quotes the price leg in gwei.
Frequently asked questions
How many gwei are in 1 ETH?
One ETH equals 1,000,000,000 gwei (10^9 gwei). One gwei equals 0.000000001 ETH.
Is gwei only used on Ethereum?
Gwei is the common quote unit on Ethereum. Other EVM networks often use the same naming when they price gas in their native coin.
Why does my fee change if gwei changes?
Because the fee is gas used times price per gas. If the gwei price doubles and gas used stays the same, you pay about twice as much.
Related guides
H
Halving
Halving: A halving is a coded event that cuts in half the number of new coins miners receive for each block. In bitcoin it happens every 210,000 blocks, roughly every four years, and slows how fast new bitcoin is created until the 21 million supply cap is reached. It changes new supply, not demand, so it guarantees no price outcome.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a halving works
On a proof of work network, miners who add a block earn a block reward of newly created coins plus transaction fees. The halving rule cuts the new-coin part in half at a set block height, not a calendar date. Nobody votes on it, because it is written into the software that every node runs.
The bitcoin halving schedule
Bitcoin started in 2009 with 50 bitcoin per block. Four halvings have happened, in 2012, 2016, 2020 and 2024, and the April 2024 halving cut the reward from 6.25 to 3.125 bitcoin. The next is due at block 1,050,000, expected around 2028. Our bitcoin halving explainer sets out each past halving in a table.
What a halving means for miners
After a halving, miners earn half as much new bitcoin for the same work, so less efficient operators can become unprofitable unless the price or fees rise. Over time, transaction fees are designed to make up a larger share of what miners earn.
What a halving does not guarantee
Past halvings have been followed by large price moves, but four events are too few to prove a rule, and price also depends on demand, interest rates, regulation and market mood. The halving is known years in advance. Treat any claim that it guarantees a higher price with caution, and read our guide to the halving and the crypto market cycle for the wider context.
Frequently asked questions
When is the next bitcoin halving?
It is due at block 1,050,000, expected around 2028. The exact date depends on how quickly blocks are found, so estimates firm up as that block gets closer.
Do other cryptocurrencies have halvings?
Some proof of work coins, such as Litecoin, have similar schedules. Proof of stake networks such as Ethereum do not have a bitcoin-style halving.
Does the halving affect people who already hold bitcoin?
It does not change how many bitcoin you already hold. It only reduces how many new bitcoin miners receive for each block from that point on.
Related guides
Hard fork
A code change in a blockchain protocol so significant that it becomes incompatible with older versions.
Hash
A code change in a blockchain protocol so significant that it becomes incompatible with older versions.
Hash rate
Hash rate: Hash rate is a measure of how many hashing calculations miners on a proof of work network are performing each second. A higher network hash rate means more computing power is securing the chain. Investors watch it as one sign of miner commitment and network security, not as a price forecast.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How hash rate is measured
Miners repeatedly run candidate blocks through a hashing function until they find a valid result, which is the proof of work process described in the Bitcoin developer documentation. Hash rate counts how many of those attempts happen per second across the network. You will see units such as terahashes (TH/s) or exahashes (EH/s) per second. Public figures are estimates built from recent blocks and the current difficulty, not a live census of every machine.
Why hash rate matters for security
To rewrite recent Bitcoin history, an attacker would need to outpace the honest mining majority for long enough to rebuild those blocks. More honest hash rate makes that more expensive in hardware and electricity. That is why a rising network hash rate is often read as stronger security. A sudden drop can mean miners have turned machines off after a price fall or a jump in energy costs.
Hash rate vs price
Hash rate and price often move in the same broad direction over long periods because miners earn the block reward in the network’s coin and pay real-world costs. The link is not one-for-one day to day. Hash rate can lag price, and miners with cheap power can keep running when others stop. Treat hash rate as a network health signal, not a trading indicator.
What investors should remember
Hash rate says nothing about whether a coin is a good investment on its own. It also does not appear on proof of stake networks, which secure themselves with staked coins instead of hashing. When our research team reviews Bitcoin network data, hash rate sits alongside difficulty, fees and miner revenue rather than standing alone.
Frequently asked questions
What is a good Bitcoin hash rate?
There is no single good number. What matters more is the trend and how costly it would be to attack the network compared with earlier periods.
Who publishes hash rate figures?
Blockchain data sites estimate hash rate from block times and difficulty. The figure is an approximation, which is why different dashboards can disagree slightly.
Does Ethereum have a hash rate?
Ethereum used proof of work hash rate until the Merge in September 2022. It now uses proof of stake, so network security is tracked through stake and validators instead.
Related guides
Hedge fund
A pool of money contributed by private investors and run by a fund manager. The hedge fund manager’s goal is to generate as high a return as possible whilst taking on as little risk as possible.
HODL
HODL: HODL means holding a crypto asset for the long term instead of selling during price swings. The word began as a typo of "hold" in a 2013 Bitcoin forum post titled "I AM HODLING", and it later picked up the backronym "hold on for dear life".
By Matt Willemsen, Director of Research. Reviewed by Ben Simpson. Updated November 2026. General education only, not financial advice.
Where HODL came from
In December 2013 a user on the Bitcointalk forum posted a message titled “I AM HODLING” during a sharp fall in the bitcoin price. The post admitted he was a poor trader and would rather just hold. The typo spread as a meme, and HODL became shorthand for sitting through volatility rather than reacting to it.
What HODL means as a strategy
As an approach, HODL is a buy and hold strategy. You choose assets you believe in over several years, buy them, and avoid frequent trading. Many people combine it with dollar cost averaging, buying a fixed amount on a regular schedule so they do not have to time the market.
HODL vs trading
A trader tries to profit from short-term price moves and needs time, rules and discipline to manage risk. A holder accepts that prices will swing and focuses on the long-term thesis instead. Holding usually means fewer taxable events and lower fees, but it also means sitting through deep falls without selling.
Risks of holding without a plan
HODL is not the same as ignoring your portfolio. Projects can fail, and some coins never recover after a crash. A sensible plan sets how much of your portfolio each asset can be, when you would review the thesis, and where the coins are stored. Long-term holdings are often kept in a wallet you control rather than on an exchange.
Frequently asked questions
What does HODL stand for?
It started as a typo of "hold". People later turned it into "hold on for dear life", but that meaning came after the original post.
Is HODL a good strategy?
It depends on what you hold and why. Holding works only if the asset keeps its long-term value, so research and position sizing matter more than the label.
Do I pay tax if I HODL in Australia?
Holding alone is not a taxable event. The ATO generally treats selling, swapping or spending crypto as a disposal for capital gains tax, and assets held for more than 12 months may get the CGT discount.
Where should I keep crypto I plan to HODL?
Many long-term holders use a self-custody wallet, often a hardware wallet, so they control the private keys. Keep the seed phrase offline and private.
Related guides
I
Index fund
A type of mutual fund or exchange-traded fund (ETF) that is designed to track the returns of a market index such as the ASX 200.
Inscriptions
The metadata that is added or ‘inscribed’ onto Bitcoin satoshis (sats). Inscriptions are essentially digital entries or ‘artifacts’ on the Bitcoin blockchain.
Interoperability
The extent to which blockchains are cross-compatible and can leverage other blockchains’ unique properties.
Interoperable
The ability to be compatible across different blockchains.
L
Layer 2 (L2)
Layer 2 (L2): A layer 2 (L2) is a network built on top of an existing blockchain, called the layer 1, to make transactions faster and cheaper. It processes transactions away from the main chain, then posts the results or proofs back to it, so it relies on the layer 1 for much of its security.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How layer 2 networks work: rollups
Most Ethereum layer 2s are rollups. They bundle many transactions together and post compressed data back to Ethereum. Optimistic rollups assume transactions are valid unless someone challenges them within a set window. Zero knowledge (ZK) rollups post a cryptographic proof that each batch is valid.
Examples of layer 2 networks
Arbitrum, Optimism and Base are optimistic rollups on Ethereum, while zkSync uses zero knowledge proofs. On Bitcoin, the Lightning Network is a layer 2 built for fast, low fee payments.
Layer 2 trade offs
Fees are much lower, but moving funds between a layer 2 and the main chain uses a bridge, and withdrawals through an optimistic rollup’s own bridge can take about a week. Many layer 2s still rely on a single operator for some functions, so decentralisation varies.
Frequently asked questions
Is a layer 2 safer than a layer 1?
Not usually. A layer 2 adds its own smart contract and operator risks on top of the layer 1 it settles to.
Do I need a different wallet for layer 2?
Usually not. Most Ethereum wallets support the major layer 2 networks. You switch network in the wallet and pay fees on that network.
Related guides
Leverage
Leverage: Leverage means using borrowed funds to open a trading position larger than the money in your account. With 10 times leverage, a deposit of 1,000 controls a position worth 10,000. Leverage magnifies both gains and losses, and if the price moves against you, the position can be liquidated.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How leverage and margin work
The money you put up is called margin, and the platform lends the rest. Leverage is shown as a multiple, such as 2x, 5x or 10x. The higher the multiple, the smaller the price move needed to use up your margin.
Liquidation explained
With 10 times leverage, a 10 per cent move against you can wipe out your margin. Before that point, the platform closes the position automatically, which is called liquidation. Large waves of liquidations can push prices sharply in one direction for a short time.
Why long term investors watch leverage
Even if you never trade with leverage, funding rates and open interest show how much borrowed money is in the market. Crowded leverage has often come before sharp moves, which helps explain sudden swings in price.
Frequently asked questions
Is leverage trading the same as investing?
No. Leverage is a short term trading tool. Many long term investors avoid it because a brief move can close a position before the price recovers.
What is a margin call?
A margin call is a warning that your margin is running low. Adding funds or reducing the position can avoid liquidation, although not always in a fast market.
Related guides
Liquidate
The process of turning property or assets into cash.
Liquidity
Liquidity: Liquidity is how easily you can buy or sell a crypto asset without moving its price much. A liquid market has many buyers and sellers, deep order books and tight spreads. In an illiquid market, even a modest order can push the price sharply and leave you with a worse fill.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How liquidity is measured
Traders look at trading volume, order book depth near the current price and the bid ask spread. On a decentralised exchange, liquidity is the size of the pool of tokens that traders swap against. Larger pools mean less slippage on each trade.
What is a liquidity crisis?
A liquidity crisis happens when a firm or market cannot meet withdrawals or sell assets fast enough without large losses. In crypto this has happened when lenders or exchanges faced a rush of withdrawals and could not access enough liquid funds, leading to frozen withdrawals or collapse. It is a key reason many investors keep long-term holdings in their own wallet.
Frequently asked questions
Why does liquidity matter for small coins?
Low liquidity means larger price swings and higher slippage, and it can be hard to sell when you want to.
Is liquidity the same as market cap?
No. Market cap is price times circulating supply. Liquidity is how much can actually be traded near the current price.
Related guides
Liquidity pool
Liquidity pool: A liquidity pool is a smart contract that holds reserves of two or more tokens so traders can swap against the pool instead of waiting for another person’s order. Liquidity providers deposit tokens into the pool and usually earn a share of trading fees. Pools power most decentralised exchanges that use an automated market maker.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a liquidity pool works
On an automated market maker, the pool’s balances and a pricing formula set the swap rate. When someone buys token A with token B, the pool’s reserves shift and the price moves along the curve. Ethereum’s DeFi documentation describes these pools as the inventory that lets users trade without a traditional order book of bids and asks.
What liquidity providers do
A liquidity provider deposits the required tokens, often in a set ratio, and receives LP tokens or an equivalent position that represents their share of the pool. As traders pay fees, that share can grow. When the provider withdraws, they redeem against the current reserves, which may differ in mix and value from what they put in.
Risks inside a pool
Token prices can diverge so your withdrawn mix is worth less than if you had held the tokens outside the pool, often called impermanent loss. A buggy or malicious pool contract can lose deposits. Thin pools create high slippage for traders and volatile returns for providers. Some pools include unstable or unaudited tokens that can go to zero.
Pools vs order books
Centralised exchanges usually match buyers and sellers on an order book with market makers posting bids and asks. A liquidity pool replaces that matching with reserves and a formula, which is why you can swap from a self-custody wallet at any time the chain is running. Our Guide to Uniswap walks through one widely used pool-based exchange design.
Frequently asked questions
What is an LP token?
A token or position that represents your share of a liquidity pool. You return it to the pool contract when you withdraw your portion of the reserves.
Do liquidity pools only hold two tokens?
Two-token pools are common, but some designs hold more than two assets or concentrate liquidity in a price range. Always read the specific pool’s rules.
Who earns the trading fees?
Usually the liquidity providers, in proportion to their share of the pool, after any protocol fee cut set by governance.
Related guides
Liquidity provider (LP)
An LP is a party that deposits an equivalent value of 2 (or more) tokens into a liquidity pool. They take on price risk and are compensated with fees.
Long
Long position: Going long, or taking a long position, means buying a crypto asset because you expect its price to rise. A long gains value when the price goes up and loses value when it falls. Simply buying and holding bitcoin is a long position, and traders can also go long with futures.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Going long on spot vs futures
A spot long is the simplest form: you buy the coin, own it outright and can hold it as long as you like. The most you can lose is what you paid. A futures long gives you exposure to the price without owning the coin, using margin and often leverage, and funding payments may apply on perpetual futures.
Long vs short
A long gains when the price rises and a short gains when the price falls. On perpetual futures, when funding is positive, longs pay shorts, and when it is negative, shorts pay longs. This keeps the contract price close to the spot price.
The risk of leveraged longs
With leverage, a small fall can use up your margin and trigger liquidation, even if the price recovers later. That is why many long term investors stick to spot holdings they own outright.
Frequently asked questions
Is buying and holding crypto a long position?
Yes. Buying a coin and holding it is a long position with no leverage and no expiry date.
Can a long position be liquidated?
A spot long cannot. A leveraged futures long can be closed automatically if the price falls far enough to use up your margin.
Related guides
M
Mainnet
A trading position opened by investors and traders who buy a cryptocurrency with the expectation to sell it at a higher market value in the future.
Margin trading
A method of trading cryptocurrencies where traders use funds borrowed from third parties in order to leverage their positions.
Market cap
Market cap: Market cap (market capitalisation) is the total value of a cryptocurrency's coins that are currently in circulation. You work it out by multiplying the circulating supply by the current price. It gives a quick sense of a project's size, but it says nothing about how many more tokens are still to come.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How market cap is calculated
The formula is circulating supply multiplied by price. If a token has 50 million coins circulating and trades at $2, its market cap is $100 million. Because supply changes slowly and price changes every second, almost all of the day to day movement in market cap comes from price.
Market cap vs fully diluted valuation
Market cap only counts coins that exist and are tradable today. Fully diluted valuation (FDV) counts every token that will ever exist. A large gap between the two means a lot of supply is still locked up for teams, investors or rewards, and those unlocks can add selling pressure later. Checking both numbers side by side is one of the simplest ways to avoid paying for a project that only looks small.
What market cap does not tell you
- It is not money invested. A thinly traded token can show a large market cap with very little cash behind it.
- It ignores lost or burned coins, which can be a meaningful share of older networks like Bitcoin.
- It does not measure usage, revenue or quality.
How we use it at Collective Shift
In our research process market cap is a starting filter, not a verdict. We read it next to FDV, the unlock schedule and liquidity, then look at on-chain activity before forming a view on a project. That habit is what turns a single headline number into context.
Frequently asked questions
Is a low market cap coin a better opportunity?
Not by itself. A low market cap can mean room to grow, but it can also mean low liquidity, heavy future unlocks or little real use. Look at FDV and tokenomics before drawing a conclusion.
What is the difference between market cap and FDV?
Market cap uses the circulating supply, while fully diluted valuation uses the maximum supply. The gap shows how much new supply could still reach the market.
Where can I check a coin's market cap?
Data sites such as CoinGecko and CoinMarketCap list market cap, circulating supply and FDV for most tokens.
Related guides
Market maker
Market maker: A market maker is a trader or firm that keeps placing both buy and sell orders for an asset, so other people can trade at any time. Market makers earn the small gap between their buy and sell prices, called the spread, and in return they keep markets liquid.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How market makers earn the spread
A market maker might offer to buy bitcoin slightly below the current price and sell slightly above it. Each time both sides fill, it keeps the difference. Because it trades in high volume, small spreads add up. Its main risk is holding coins when the price moves sharply against it.
Why market makers matter for investors
Active market makers mean tighter spreads and less slippage, so you pay closer to the quoted price when you buy or sell. Thin markets with few market makers can have wide spreads and sudden price gaps, which is common with small, newly listed tokens.
Market maker vs automated market maker
On a centralised exchange, market makers post orders on an order book. On a decentralised exchange, an automated market maker (AMM) replaces them with a liquidity pool and a pricing formula, and liquidity providers earn the trading fees instead.
Frequently asked questions
What is the difference between a maker and a taker?
A maker adds an order to the order book that does not fill straight away. A taker fills an existing order. Exchanges often charge makers a lower fee because they add liquidity.
Why do spreads widen in a sell off?
Market makers face more risk when prices move fast, so they quote wider spreads or pull orders, which makes trading more expensive until things calm down.
Related guides
Mempool
Short for ‘memory pool’, a mempool is a collection of all pending cryptocurrency transactions that have yet to be processed on a network. Most blockchains have a mempool. One notable exception is Solana.
Merkle Tree
A method of structuring data that can significantly reduce the amount of data that a trusted authority must maintain for verification purposes. Merkle trees are widely used in public blockchain networks.
Meta
An investment trend in a given market. In the cryptocurrency market, examples of past metas include alternative layer-1 blockchains and metaverse-related tokens. The term is derived from ‘metagame’, a term used by gamers to describe an ever-evolving subset of a game’s basic strategy and rules which is required to play at a high level.
Metadata
Data that provides information about other data. In the context of NFTs, metadata describes an NFT’s properties. Examples of properties are names, IDs, descriptions, traits and links to images or multi-media.
Metaverse
A concept of an immersive online universe that combines different virtual spaces. Examples of metaverses include Decentraland and The Sandbox.
Mining
Mining: Crypto mining is the process of adding new blocks of transactions to a proof of work blockchain such as Bitcoin. Miners run specialised computers that compete to solve a puzzle, and the first to succeed adds the block and earns newly created coins plus transaction fees. Mining both secures the network and issues new supply.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How mining works
Miners collect waiting transactions, build a candidate block and hash it over and over until they find a result that meets the network’s difficulty target. This is the proof of work system described in the Bitcoin developer documentation. Bitcoin adjusts its difficulty roughly every two weeks so that a new block is found about every 10 minutes, however much computing power joins or leaves.
How miners get paid
The winning miner receives the block reward: a set number of new coins plus the fees paid by the transactions in that block. On Bitcoin the new-coin part halves roughly every four years at the halving, so miners rely more on fees over time. Most individuals join a mining pool, which combines computing power and shares rewards, because winning a block alone is unlikely.
Hardware, energy and who mines today
Bitcoin mining is now dominated by ASICs, machines built only for mining, running in large facilities with cheap electricity. Home mining with a normal computer is rarely viable for Bitcoin, though some smaller proof of work coins can still be mined with graphics cards. Electricity, hardware cost and the coin’s price decide whether mining is profitable, and all three change.
Mining and Australian tax
The ATO’s crypto mining guidance says that if you carry on a business of mining, the coins you receive are trading stock of that business, and GST can apply. Whether you are in business depends on your circumstances, such as whether you mine in a planned, regular and profit-seeking way. Keep records of rewards and costs. This is general information, not tax advice.
Frequently asked questions
Can you still mine Bitcoin at home?
You can, but with a normal computer the chance of earning a meaningful reward is close to zero. Profitable Bitcoin mining needs ASIC machines and low-cost power.
Is mining the same as staking?
No. Mining uses computing power on proof of work chains. Staking locks up coins on proof of stake chains. Both secure a network and earn rewards, but the costs and risks differ.
What is a mining pool?
A group of miners who combine their computing power and share the rewards based on how much work each contributed. It gives smaller miners a steadier income.
Related guides
Mint
The process of creating a non-fungible token (NFT) via a transaction on the blockchain. When NFT collections launch, the team will typically charge a mint price (e.g. 0.08 ETH) as a way to raise capital. Sometimes, NFT collections will launch via a free mint.
Multi-signature
A digital signature scheme that enables multiple users to authorise a cryptocurrency transaction before it is broadcasted to the corresponding blockchain network.
Mutual fund
A pool of money contributed by many multiple investors and run by a fund manager. The portfolio of a mutual fund will typically include assets like stocks and bonds.
N
Node
Node: A node is a computer that runs a blockchain’s software and connects to other computers on the same network. Nodes share transactions and blocks, check the rules and keep a copy of some or all of the ledger. Without enough honest nodes, a blockchain cannot stay online or agree on its history.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
What a node does
When you send a transaction, nearby nodes hear about it, check that it follows the rules and pass it on. When a new block appears, nodes check it and add it to their copy of the chain. Ethereum’s documentation on nodes and clients describes nodes as the computers that verify blocks and transaction data, so the network does not rely on one company’s server.
Full nodes, light nodes and archive nodes
A full node downloads and verifies every block against the protocol rules and keeps enough history to check new transactions. A light node keeps less data and asks full nodes for proofs, which is lighter to run but trusts those peers more. An archive node stores the full historical state, which researchers and some services use. The labels differ by chain, but the idea is the same: more data kept locally means less reliance on someone else.
Nodes vs miners and validators
Every miner or validator runs node software, but not every node proposes blocks. Many nodes only verify and relay data. On proof of work chains, miners compete to add blocks. On proof of stake chains, validators stake coins and take turns proposing and attesting. A home user can run a non-validating full node to check the chain without earning block rewards.
What it means for investors
You do not need to run a node to hold crypto, and most investors never do. Running one is a way to verify balances and transactions yourself instead of trusting an app’s display. Our research team treats independent verification as part of understanding blockchain risk, alongside custody and smart contract checks. Exchange apps and explorers are convenient, but they are still someone else’s view of the ledger.
Frequently asked questions
Is a wallet a node?
Usually not. A typical mobile or hardware wallet talks to someone else’s node or infrastructure to read balances and broadcast transactions. Some desktop wallets can talk to a node you run yourself.
Do I need a node to use Ethereum or Bitcoin?
No. Wallets and exchanges connect to nodes for you. Running your own node is optional and mainly about verification and privacy.
Is a validator the same as a node?
A validator is a node that has staked coins and takes part in proposing or voting on blocks. Many nodes never validate and only check and share data.
Related guides
Non-fungible token (NFT)
NFTs are tokens that represent scarce digital content items. As distinct from cryptocurrencies like bitcoin, NFTs are not interchangeable. More on NFTs.
O
Off-ramp
A solution that allows investors and traders to convert cryptocurrencies to fiat currencies. Off-ramps are offered by most leading cryptocurrency exchange operators.
On-chain analytics
On-chain analytics refers to the act of analysing the data of a given blockchain, such as Bitcoin or Ethereum, to better understand trends and patterns related to network performance, user behaviour and the market.
On-ramp
A solution that allows investors and traders to convert fiat currencies to cryptocurrencies. On-ramps are offered by most leading cryptocurrency exchange operators.
Open source
Code that is designed to be publicly accessible, meaning anyone can see, modify and distribute the code as they see fit.
Options
Options: An option is a derivative contract that gives the holder the right, but not the obligation, to buy or sell an asset such as bitcoin at a set strike price on or before an expiry date. The buyer pays a premium for that right, and the seller takes on the obligation.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Calls and puts
A call option gives the right to buy at the strike price, so it gains value if the price rises above it. A put option gives the right to sell at the strike price, so it gains value if the price falls below it. If an option expires out of the money, the buyer loses the premium.
What are decentralised options?
Decentralised options platforms let users buy and sell options through smart contracts rather than a centralised exchange. Collateral is locked in the contract and settlement is automatic. They remove the exchange as a middleman but add smart contract and liquidity risk.
Frequently asked questions
Can I lose more than the premium when buying an option?
No. A buyer can lose only the premium paid. Sellers of options can face much larger losses.
Are options suitable for long-term investors?
Options are complex leveraged products. Many long-term investors never use them, and understanding them fully comes first.
Related guides
Oracle
Oracle: A blockchain oracle is a service that brings information from outside a blockchain, such as asset prices or event results, into smart contracts. Blockchains cannot fetch outside data by themselves, so oracles act as the bridge. Most DeFi lending and trading apps rely on oracles to know current prices.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Why blockchains need oracles
A smart contract can only see data already on its own blockchain. It cannot check an exchange price, the weather or a sports score. Ethereum’s documentation on oracles describes oracles as applications that source, verify and deliver this outside data so contracts can act on it, for example to decide when a loan is under-collateralised.
How oracles work
A typical price oracle gathers prices from many sources, combines them and posts the result on chain at regular intervals or when the price moves by a set amount. Decentralised oracle networks such as Chainlink and Pyth use many independent operators so that no single party controls the data. This matters because the contract will act on whatever number it receives.
The oracle problem and its risks
If an oracle reports a wrong price, the contracts relying on it can make wrong decisions, such as liquidating healthy loans or letting someone borrow far too much. Attackers have manipulated thinly traded markets to push a bad price through an oracle and drain DeFi apps. Oracle networks such as Chainlink, Pyth and RedStone sit in our research team’s DeFi infrastructure resources for members for this reason: a well-built app can still fail through a weak data feed.
What it means for investors
Before depositing into a lending or trading app, it helps to know which oracle it uses, how many sources feed it and whether it has been exploited before. Oracle risk sits alongside smart contract risk and is rarely shown on an app’s front page. Treat any yield that depends on a single, unknown price source with extra care.
Frequently asked questions
What is the most widely used crypto oracle?
Chainlink is the most widely used oracle network in DeFi, with Pyth and others also common, especially for fast-moving price data.
Why can’t smart contracts just read prices from a website?
Every node on a blockchain must reach the same result. Reading a website could give different answers at different moments, so outside data has to be posted on chain by an oracle first.
What is an oracle attack?
An attack where someone feeds or manipulates a price that an oracle reports, so that a DeFi app acts on a false value. It often involves pushing the price of a thinly traded token.
Related guides
Order book
A list of buy and sell orders on an exchange
Order book vs AMM: what is the difference?
An order book matches buyers and sellers directly: traders post bids and asks at chosen prices, and a trade happens when two orders meet. An automated market maker (AMM) has no order book. Traders swap against a pool of tokens and a formula sets the price. Centralised exchanges mostly use order books, while many DeFi exchanges use AMMs. Read our AMM guide for more.
Ordinals
The end result of a paired identifier inscribed along with inscribed data on an individual satoshi.
P
Permissionless
Not needing permission to join or interact with something that is public.
Phishing
A method of obtaining personal information such as usernames, passwords and banking details through deceptive means. Phishing is a common type of cyber attack.
Ponzi Scheme
A scam that involves an investment scheme where early investors are being paid by funds from new investors; also referred to as a pyramid scheme.
Price floor
The general low price for a collection of items (usually referring to NFT’s). For example, if the lowest available price of a collective of NFT’s is 1 Eth, then we consider the price floor of this NFT to be 1Eth.
Private key
Private key: A private key is a secret number that proves you own the crypto at a blockchain address and lets you sign transactions to move it. Anyone who has your private key controls those funds, which is why it must never be shared, typed into a website or stored where others can reach it.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Full guide: For the beginner walkthrough with video, see What Are Private Keys?. This glossary entry is the short definition only.
How a private key works
Your wallet generates a private key, then mathematically derives a public key and an address from it. The address is safe to share so people can send you crypto. The private key stays secret and creates a digital signature each time you send, which the network can check without ever seeing the key itself.
Private key vs seed phrase
Most modern wallets show you a seed phrase rather than a raw private key. The seed phrase is a human readable backup that can regenerate every private key in the wallet. Protecting the seed phrase therefore protects all of your keys at once.
Who holds your private key?
On an exchange, the exchange holds the keys and you hold an account (custodial). In a self-custody wallet such as a hardware wallet, you hold them (non-custodial). Neither is right for everyone, but you should always know which one you are using and what happens if a password, device or company disappears.
Simple habits that keep keys safe
Never enter a private key or seed phrase into a website, form or chat. Genuine support teams never ask for one. Use a hardware wallet for larger long-term holdings. Keep offline backups in more than one secure location, and plan how family could access them.
Frequently asked questions
Can a private key be recovered if I lose it?
Only from your backup, usually the seed phrase. There is no company or password reset that can restore a lost self-custody key.
Is my wallet address the same as my private key?
No. Your address is public and safe to share. Your private key is secret and controls the funds.
Does an exchange account have a private key?
Yes, but the exchange holds it for you. You access your balance with a login rather than with the key itself.
Related guides
Proof of stake (PoS)
Proof of stake (PoS): Proof of stake (PoS) is a way for a blockchain to agree on new blocks. Instead of miners using computing power, validators lock up the network’s own coins as collateral. Validators that follow the rules earn rewards, and validators that act dishonestly can lose part of their stake. Ethereum and Solana both use proof of stake.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How proof of stake works
Validators deposit coins into the protocol and run software that proposes and checks blocks. According to Ethereum’s documentation, a validator who breaks the rules, for example by signing conflicting blocks, can have some or all of their staked ETH destroyed. This penalty is called slashing, and it is what makes cheating expensive.
Proof of stake vs proof of work
Proof of work, used by Bitcoin, secures the network with electricity and specialised mining hardware. Proof of stake secures it with locked capital instead. Ethereum moved from proof of work to proof of stake in The Merge on 15 September 2022, which Ethereum says cut its energy use by about 99.95%. Supporters of each model still debate the trade-offs in security and decentralisation.
How investors take part through staking
Running your own Ethereum validator needs at least 32 ETH and technical setup. Most people take part through staking instead, by delegating to a validator, using an exchange staking service or holding a liquid staking token. Each option adds its own risks, such as the provider failing, lock-up periods or smart contract bugs. Staking rewards are not guaranteed and can change.
Proof of stake rewards and Australian tax
The ATO’s guidance on staking rewards treats the money value of staking rewards as ordinary income when you receive them, and a later disposal of those tokens can create a capital gain or loss. Keep records of each reward in Australian dollars. This is general information, not tax advice.
Frequently asked questions
Is proof of stake more secure than proof of work?
They secure the network in different ways. Proof of work makes attacks expensive through energy and hardware, proof of stake through locked capital that can be slashed. Each has trade-offs, and neither makes a coin a safe investment.
Do I need 32 ETH to stake?
Only to run your own Ethereum validator. Pools, exchanges and liquid staking let people stake smaller amounts, with extra provider and smart contract risks.
Which blockchains use proof of stake?
Ethereum, Solana and many newer networks use forms of proof of stake. Bitcoin uses proof of work.
Related guides
Proof of work (PoW)
Proof of work (PoW): Proof of work is the way some blockchains, most famously Bitcoin, agree on which transactions are valid. Miners race to solve a maths puzzle using computing power, and the winner adds the next block and earns a reward. Because rewriting history would mean redoing all that work, the record becomes very hard to change.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How proof of work operates
Every few minutes, miners bundle pending transactions into a candidate block and repeatedly run it through a hashing function, changing one small number each time, until the result falls below a target set by the network. Finding that answer takes enormous trial and error, but anyone can check it instantly. The Bitcoin white paper introduced this design in 2008 to stop the same coin being spent twice without a central referee.
Why it is hard to attack
To change a past transaction, an attacker would need to redo the work for that block and every block after it, faster than the rest of the network adds new ones. In practice that means controlling more than half of the total mining power, often called a 51% attack. On a large network such as Bitcoin, the cost of the hardware and electricity makes this extremely expensive, which is the security trade-off proof of work is built on.
Proof of work vs proof of stake
Proof of stake replaces computing power with capital: validators lock up coins and can lose part of them for cheating. As our coaching team explains it in member sessions, a proof of work chain has you chasing an equation, while a proof of stake chain has you put some of your coins at risk. Ethereum used proof of work until the Merge in September 2022, when it switched to proof of stake. Bitcoin still uses proof of work.
What it means for investors
Proof of work ties a network’s security to real-world costs such as hardware and energy, which is why mining activity and hash rate are watched as signs of network health. The main criticism is energy use. Whether that trade-off is worth it is a long-running debate, and understanding it helps when comparing Bitcoin with proof of stake networks.
Frequently asked questions
Does Bitcoin use proof of work?
Yes. Bitcoin has used proof of work since it launched in 2009, and miners still secure the network this way.
Does Ethereum still use proof of work?
No. Ethereum moved from proof of work to proof of stake in September 2022, an upgrade known as the Merge.
Why does proof of work use so much energy?
Miners compete by making trillions of guesses, and every guess uses electricity. The energy cost is part of what makes attacking the network so expensive.
Related guides
Protocol
A set of rules that tells something how to do certain actions. The rules set forth in protocols can be encoded in software. Examples include the Bitcoin protocol and Internet Protocol (IP).
Public key
A unique string of letters and numbers that is visible on a blockchain. A public key can be derived from a private key—but the opposite is not possible.
Pullback
A decline in the charts from a recent peak.
Put option
An option contract where the owner has the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price (i.e., strike price) within a specified time.
Q
Query
A precise request for information retrieval with databases and information systems. Query languages are programming languages used to create queries in databases and information systems.
R
Rekt
A slang version of the word “wrecked” that is most commonly used to describe a margin trader who has just had their position liquidated.
Repo market
The repo market is where banks, financial institutions and other participants borrow and lend cash for short periods in exchange for high-quality securities. (Repurchase agreements, or repos, are short-term loans which are often made overnight.
Restaking
The act of using staked tokens to help secure another protocol. The EigenLayer protocol is pioneering restaking.
Retail investor
A non-professional investor. Also often referred to as an ‘everyday investor’.
Rollup
A type of blockchain that uses another blockchain for data availability. Examples of rollups include OP Mainnet, Base, Zora and Arbitrum One.
Rug-pull
A malicious operation where the creators of a cryptocurrency withdraw liquidity and run away with investor funds.
S
Sandbox
An isolated testing environment that enabled developers to run and test applications before the changes are deployed on the main net
Satoshi
The smallest denomination of bitcoin (i.e., one hundred millionth of a single bitcoin, or 0.00000001 BTC). The plural form—satoshis—is commonly shortened to ‘sats’.
Satoshi Nakamoto
The name used by the person(s) who invented Bitcoin, authored the Bitcoin whitepaper, and published the original Bitcoin client software.
Security
In finance, a security is an investment which can be traded in financial markets. (Securitisation refers to the process of transforming assets into interest-bearing securities.)
Seed phrase
Seed phrase: A seed phrase, also called a recovery or mnemonic phrase, is a list of 12 or 24 words that backs up a crypto wallet. From those words, any compatible wallet can recreate all of your private keys and restore your funds. Whoever has the phrase controls the wallet, so it needs to be stored offline and kept private.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a seed phrase works
When you set up a self-custody wallet it creates a large random number and shows it to you as words drawn from a standard list of 2,048 English words (the BIP39 standard). The order matters. Those words regenerate the same keys on any wallet that supports the standard, which is why you can move from one device or app to another.
12 words or 24 words?
Both are considered secure for individual investors when generated by a reputable wallet. A 24 word phrase adds more randomness, while 12 words is easier to write down accurately. Accurate, safe storage matters far more than the length.
Storing your seed phrase
- Write it on paper or stamp it into metal. Never photograph it, email it or save it in cloud notes.
- Keep copies in two separate secure places to protect against fire or loss.
- Consider how a trusted person could access it if something happened to you, without exposing it today.
The most common seed phrase scam
Fake support accounts, wallet pop-ups and airdrop sites ask you to “verify” or “sync” your wallet by entering your phrase. No legitimate wallet, exchange or support team will ever ask for it. Treating that as an absolute rule prevents most self-custody losses.
Frequently asked questions
What happens if I lose my seed phrase?
If your device still works you can create a new wallet and move your funds to it straight away. If both the device and the phrase are lost, the funds cannot be recovered.
Is a seed phrase the same as a private key?
No. A seed phrase is a backup that can generate many private keys, so it protects the whole wallet rather than a single address.
Can I store my seed phrase in a password manager?
Many security guides suggest keeping it fully offline because any online copy adds risk. Weigh convenience against that risk for the amounts involved.
Related guides
Seigniorage
The profits earned by central banks or other monetary authorities through the production and maintenance of fiat money.
Sentiment analysis
The process of aggregating a large number of text documents and categorising them in a way that indicates the current level of sentiment over a given asset.
Share
Part ownership of a company. An investor will typically buy shares on a stock market such as the Australian Securities Exchange (ASX). Once they do, they become a shareholder of the company they bought shares in.
Short
Short position: Going short, or shorting, means taking a position that gains value when a crypto asset's price falls. Traders usually short with futures contracts, or by borrowing coins to sell now and buy back later. If the price rises instead, the short loses money, and that loss has no fixed limit.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How shorting works
The classic short borrows a coin, sells it at the current price and buys it back later to return it. If the price has fallen, the trader keeps the difference. In crypto, most shorting happens through perpetual or dated futures, where you open a short position against margin without borrowing the coin yourself.
What is a short squeeze?
A short squeeze happens when the price rises and short sellers rush to buy back and close their positions, or are liquidated. That buying pushes the price higher, which can force out more shorts. Squeezes can cause sharp, fast moves in either a single coin or the whole market.
Short vs long
A long gains when the price rises and a short gains when it falls. Some investors use a short to hedge coins they already hold, but it adds cost, funding payments and complexity.
Frequently asked questions
Why is shorting riskier than buying?
When you buy, the most you can lose is what you paid. A short loses more the higher the price rises, and leverage can trigger liquidation quickly.
Can Australians short crypto?
Some platforms offer futures or margin trading, subject to local rules. They are complex leveraged products where losses can be rapid.
Related guides
Side Chain
A seperate blockchain ledger that runs parallel with the primary blockchain.
Slashing
Slashing: Slashing is a penalty on proof of stake blockchains that destroys part of a validator’s staked coins for serious misbehaviour, such as signing two conflicting blocks. It is meant to make attacks expensive for anyone who tries to break consensus. Small downtime penalties are usually separate and milder than full slashing.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
What slashing is designed to stop
On proof of stake networks, validators propose and attest to blocks while their stake is at risk. Ethereum’s rewards and penalties documentation explains that slashing targets behaviours that threaten consensus safety, for example attesting to two different blocks for the same slot. The burned stake raises the cost of trying to fork or censor the chain.
Slashing vs ordinary penalties
Going offline usually earns a small penalty that grows the longer the validator is missing, but that is not the same as being slashed. Slashing is reserved for clear rule breaks, and a slashed Ethereum validator is also force-exited from the set. Exact parameters differ by network, so always check the chain you are using rather than assuming Ethereum’s numbers apply everywhere.
What it means if you stake through someone else
Most investors stake via an exchange, a pooled service or a liquid staking token rather than running a validator. In those setups, the operator runs the validator keys. A serious operator fault can reduce rewards or, in some designs, pass through a share of slashing losses. Read whether the service socialises slashing, self-insures or leaves risk with the depositor.
Practical takeaways
Slashing risk is one reason validator uptime, key management and client diversity matter. Ethereum’s staking overview frames solo staking as a technical responsibility, not only a deposit of coins. For Australian readers, staking rewards can have tax consequences when received; see the ATO’s staking guidance. This is general information, not tax advice.
Frequently asked questions
Can slashing take my whole stake?
Designs vary. Slashing usually burns a portion of stake and exits the validator, and correlated offences can increase the penalty. It is not meant as a routine fee for short downtime.
Is Eth 2.0 still the right name?
Ethereum’s proof of stake upgrade is complete; people once called the staking chain Eth 2.0. Slashing remains part of proof of stake security under the current protocol.
Does Bitcoin use slashing?
No. Bitcoin uses proof of work mining, not staked-validator slashing. Miners are paid by block rewards and fees, and they do not post a slashable stake.
Related guides
Slippage
Slippage: Slippage is the difference between the price you expect when you place a crypto trade and the average price your order actually fills at. It happens when prices move quickly or when there are not enough orders at your price, so a large or fast trade fills across several worse prices.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
What causes slippage
Two things drive most slippage. The first is liquidity: if few buy and sell orders sit near the current price, a market order has to reach further into the order book to fill. The second is volatility: when the price moves between the moment you click and the moment the trade settles, the fill can differ from the quote. Large orders in small, newly listed tokens tend to suffer most.
A simple worked example
Say you place a market order expecting to pay A$1,000 for a coin, and the order fills at an average of A$1,010 because the best offers ran out. The A$10 difference is 1% negative slippage. This is a hypothetical illustration, not a typical figure. Slippage can also be positive if the price moves in your favour before the fill.
Slippage tolerance on decentralised exchanges
On a decentralised exchange that uses an automated market maker, your wallet asks you to set a slippage tolerance, the maximum price change you will accept. If the price moves further, the swap fails instead of filling. A very high tolerance can let your swap fill at a much worse price, and it can make the trade an easier target for bots that trade just before and after you.
How investors limit slippage
Use a limit order where the exchange offers one, so you set the most you will pay or the least you will accept. As our research team often points out to members, a limit order protects you from negative slippage but may not fill at all if the price never reaches your level. Splitting a large order, trading markets with deeper liquidity and avoiding thin markets during sharp moves also help. A gap between an exchange quote and a price-tracking website is not always slippage; spreads and fees can also explain it.
Frequently asked questions
Is slippage the same as a trading fee?
No. A fee is a set charge from the exchange or network. Slippage is the price difference caused by liquidity and price movement. Your total cost of a trade can include both.
What slippage tolerance should I set?
There is no single right number. A lower tolerance protects your price but makes failed swaps more likely during volatile periods. Check the quoted minimum you will receive before confirming any swap.
Can slippage be positive?
Yes. If the price moves in your favour between placing and filling the order, you can receive a better price than expected.
Related guides
Smart contract
Smart contract: A smart contract is a program stored on a blockchain that runs automatically when set conditions are met. Once deployed, anyone can check its code and it executes the same way for everyone, without a company in the middle. Smart contracts power token swaps, lending apps, stablecoins and NFTs, mostly on Ethereum and similar networks.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a smart contract works
A smart contract follows “if this, then that” logic. Ethereum’s developer documentation compares it to a vending machine: put in the right input and you get a set output. Each action is a blockchain transaction, so it costs a network fee, called gas on Ethereum. The term was coined by computer scientist Nick Szabo in the 1990s, years before blockchains could run them.
Where smart contracts are used
Most of DeFi runs on smart contracts. A decentralised exchange uses them to hold liquidity pools and price swaps, lending apps use them to manage collateral and loans, and token contracts record who owns each token. Apps built on top of these contracts are often called dapps.
Smart contract risks
Code can contain bugs, and many contracts cannot be changed once deployed, so a flaw can be exploited before anyone can fix it. Some contracts can be upgraded by an admin key, which means you are trusting whoever controls that key. Contracts that rely on outside price data also depend on an oracle. A security audit reduces risk but does not remove it.
What this means for investors
When you connect a wallet to an app, you often approve a smart contract to move a token on your behalf. Only approve contracts you have checked, review old approvals from time to time and keep long-term holdings in a separate wallet from the one you use for apps. A smart contract does exactly what its code says, which is not always what its website says.
Frequently asked questions
Is a smart contract legally binding?
Not automatically. A smart contract is code that executes on a blockchain. Whether an arrangement is legally enforceable depends on the law that applies, not on the code.
Can a smart contract be changed?
It depends on how it was built. Some are fixed once deployed. Others use an upgrade pattern controlled by an admin key or a governance vote, which adds trust in whoever holds that control.
Do smart contracts only run on Ethereum?
No. Ethereum popularised them, and many other networks, including Solana and Ethereum layer 2 networks, also run smart contracts.
Related guides
Smart-Contract Blockchain
A blockchain that’s optimised for running smart contracts. Examples are Ethereum, Solana and Avalanche. These differ from blockchains like Bitcoin, which has a very limited ability to run smart contracts.
Soft fork
A code change in a blockchain protocol that is backwards-compatible. That is to say, soft forks do not mandate all participating nodes update their software.
Solidity
A type of cryptocurrency designed to maintain as stable a price as possible. Despite offering the same utility, the form and function of stablecoins differ tremendously.
Stablecoin
Stablecoin: A stablecoin is a crypto token designed to keep a steady value against another asset, usually the US dollar. Most are backed by reserves of cash and short-term government debt held by an issuer. Stablecoins let people move dollar value on a blockchain, but they can lose their peg if the backing or design fails.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How stablecoins hold their value
A stablecoin aims to trade at, for example, one US dollar per token. Fiat-backed stablecoins such as USDC and Tether (USDT) rely on an issuer holding reserves and redeeming tokens for dollars. Crypto-backed stablecoins such as DAI are created against crypto locked in smart contracts, usually worth more than the stablecoins issued. Algorithmic designs try to hold the peg with code and incentives alone.
What stablecoins are used for
Traders use stablecoins to move between assets without converting back to Australian dollars, and DeFi apps use them for lending, borrowing and liquidity pools. They also make it possible to send dollar value across borders on a blockchain at any hour. Holding a stablecoin is not the same as holding money in an Australian bank account.
Stablecoin risks to understand
A depeg happens when a stablecoin trades away from its target value. Causes include doubts about reserves, a run on redemptions, smart contract exploits and flawed design. The algorithmic stablecoin TerraUSD (UST) lost its peg in May 2022 and did not recover. Issuers of fiat-backed coins can also freeze tokens at specific addresses, and rules for stablecoins differ between countries and continue to change.
Stablecoins and Australian tax records
The ATO’s guidance on crypto-to-crypto swaps says that exchanging one crypto asset for another is a CGT event for the asset you give up, so swapping a coin into a stablecoin can create a capital gain or loss even though you never touched Australian dollars. Keep the AUD value of each swap. This is general information, not tax advice.
Frequently asked questions
Are stablecoins safe?
No stablecoin is risk free. Fiat-backed coins depend on the issuer and its reserves, crypto-backed coins depend on smart contracts and collateral, and algorithmic designs have failed before. Read how a coin is backed before holding it.
Is a stablecoin the same as cash?
No. A stablecoin is a crypto asset issued by a company or protocol. It is not a bank deposit and does not carry the protections of an Australian bank account.
What does it mean when a stablecoin depegs?
It means the token trades meaningfully above or below its target value, for example well under one US dollar. Some depegs are brief, others are permanent.
Related guides
Stacking sats
Bitcoiners use this Matt Odell-coined term to share ways they’ve been accumulating bitcoin. Common examples: buying on Cash App, earning via Lolli, and profitably trading BTC-paired altcoins.
Staking
Staking: Staking means locking up a proof of stake cryptocurrency to help secure its blockchain, and earning rewards in return. Validators put tokens at stake as a guarantee of honest behaviour, and can lose part of them if they break the rules. Investors can stake directly, through a pool, via a liquid staking token or on an exchange.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How staking works
On a proof of stake network such as Ethereum, validators are chosen to propose and confirm blocks in proportion to the tokens they have staked. Rewards come from newly issued tokens and transaction fees. Misbehaviour, or in some networks long downtime, can lead to a penalty called slashing.
Ways to stake
- Solo staking: running your own validator. On Ethereum this needs 32 ETH and reliable hardware.
- Pooled or liquid staking: you deposit any amount and receive a token that represents your staked position, which can usually be traded.
- Exchange staking: the platform stakes for you and holds custody of your tokens.
Risks to understand first
Staking rewards are not risk free. Token prices can fall by more than the reward earned, some networks have unbonding periods before you can withdraw, and liquid staking or exchange options add smart contract or platform risk. Always check who holds custody of the tokens.
Staking and tax in Australia
The ATO generally treats staking rewards as ordinary income at their market value when you receive them, with capital gains tax applying when you later dispose of the tokens. Keep records of every reward and speak to a registered tax agent about your own situation.
Frequently asked questions
Is staking the same as earning interest?
Not quite. Rewards come from the network for helping secure it, and the amount varies. Your principal is also exposed to price moves and protocol risk.
Can I stake Bitcoin?
Bitcoin uses proof of work, so it has no native staking. Products that offer Bitcoin yield rely on lending or other protocols with their own risks.
What is liquid staking?
Liquid staking gives you a token representing your staked coins, so you keep earning rewards while still being able to move or trade that token.
Related guides
State root
The root hash of a specialised Merkle tree (i.e. Patricia Merkle Trie) that stores the entire state of the system.
Strike price
The set price at which an option holder can buy or sell the underlying asset when the option is exercised. Strike price is sometimes called ‘exercise price’. (With options, to ‘exercise’ means to put into effect the right to buy or sell the underlying asset.)
T
Technical analysis
The process of forecasting the direction of an asset’s price movements by relying on historical price and volume data.
Testnet
Testnet: A testnet is a separate copy of a blockchain used for testing. Developers use it to try smart contracts, apps and network upgrades without risking real money, because testnet tokens have no market value and are usually free from a faucet.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Testnet vs mainnet
The mainnet is the live network where transactions and tokens have real value. A testnet runs the same or similar software but with its own separate ledger and worthless tokens. Upgrades are usually trialled on testnets before they reach mainnet.
Testnets and airdrop scams
Some projects reward early testnet users, which has made testnets popular with people hunting airdrops. Be wary of anyone selling testnet tokens or asking you to connect a wallet holding real funds to a testnet app; genuine testnet tokens are free.
Frequently asked questions
Do testnet tokens have value?
No. They are for testing and cannot be swapped for real crypto on legitimate platforms.
How do I get testnet tokens?
From a faucet, a website that gives out small amounts of testnet tokens to developers and testers.
Related guides
Token contract
The address location of the actual token contract that manages the logic for the tokens. It does not refer to the address that holds your own personal tokens!
Transaction
A collection of information the blockchain needs in order to transfer cryptocurrency. Transactions are not valid unless they are signed with the appropriate private key.
Transaction fee
An amount of cryptocurrency included in a transaction that is collected by a miner of said cryptocurrency. Transaction fees incentivise miners to process transactions.
U
Unit Bias
The tendency for investors to buy shares and cryptocurrencies based on their relatively low per-unit cost. Typically, these investors fail to appreciate the relationship between the total supply of units and per-unit cost.
Universal 2nd Factor (U2F)
An authentication method that requires a physical device.
V
Validator
Validator: A validator is a participant on a proof of stake blockchain that checks transactions, votes on new blocks and sometimes proposes them. To take part, a validator locks up the network’s coins as a security deposit. Honest work earns rewards, while going offline or breaking the rules can cost part of that deposit.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
What a validator does
On a proof of stake network, validators take turns proposing blocks and attesting, or voting, that other validators’ blocks are correct. A validator is run by software on a computer that stays online and connected to the network, controlled by a key pair. Validators do the job that miners do on proof of work chains, without the energy-heavy puzzle.
What a validator stakes
On Ethereum, running your own validator requires 32 ETH, according to ethereum.org’s solo staking guide. That stake is the guarantee of good behaviour. Other networks set their own requirements, and many let token holders delegate coins to a validator instead of running one themselves.
Rewards and slashing
Validators earn rewards in the network’s coin for doing their job, as described in Ethereum’s proof of stake documentation. Small penalties apply for being offline. Serious faults, such as signing two conflicting blocks, trigger slashing, where part of the stake is destroyed and the validator is removed. Reliable setup matters as much as the stake itself.
What it means for investors
Most investors never run a validator. When you stake through an exchange, a pool or a liquid staking token, someone else runs the validator for you and takes a fee, and you rely on them to stay online and avoid slashing. Staking rewards may count as income for tax; see the ATO’s staking guidance. This is general information, not tax advice.
Frequently asked questions
How much ETH do you need to be a validator?
Running your own Ethereum validator requires 32 ETH. With less, investors can stake through a pool, an exchange or a liquid staking token.
Is a validator the same as a node?
Not quite. A node is any computer running the network software. A validator is a node that has staked coins and takes part in proposing and voting on blocks.
Can a validator lose money?
Yes. Validators can be penalised for downtime and slashed for serious rule breaks, which destroys part of their stake.
Related guides
Virtual machine
In the context of blockchains, a virtual machine (VM) acts as a secure and isolated environment where code gets run within the blockchain network. The Ethereum Virtual Machine (EVM) is an example of a VM.
Volatility
The frequency and severity with which the market price of an asset fluctuates. Generally speaking, rising volatility is associated with rising uncertainty among investors and traders.
Volume
The quantity of all trades happening in a given timeframe.
W
Wallet
Crypto wallet: A crypto wallet is an app or device that stores the private keys that control your crypto. The coins themselves stay on the blockchain; the wallet holds the keys that prove ownership and sign transactions, and shows the address you share to receive funds.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How a crypto wallet works
When you create a wallet it generates a private key, and from that a public key and an address. To send crypto, the wallet signs the transaction with your private key and broadcasts it to the network. Most wallets back up every key with a 12 or 24 word seed phrase, which can restore the wallet on another device.
Hot wallets vs cold wallets
A hot wallet is connected to the internet, such as a mobile or browser wallet. It is convenient for regular use but more exposed to hacks and phishing. A cold wallet, usually a hardware device, keeps keys offline and signs transactions on the device itself, which suits larger long-term holdings.
Custodial vs self-custody wallets
With a custodial wallet, such as an exchange account, the provider holds the keys for you. With a self-custody wallet you hold the keys and the seed phrase yourself, so nobody can freeze your funds, but nobody can recover them for you either.
Frequently asked questions
Does a crypto wallet hold my coins?
No. Your coins are recorded on the blockchain. The wallet holds the keys that let you move them.
What happens if I lose my wallet device?
You can restore a self-custody wallet on a new device with your seed phrase. Without the seed phrase the funds cannot be recovered.
Related guides
Web3
Web3: Web3 is a label for a vision of the internet where users hold assets and identity in their own wallets and apps coordinate through blockchains and smart contracts instead of only through company servers. In practice it covers crypto wallets, dapps, NFTs and decentralised protocols. The term is broad, and not every product that uses it is decentralised in substance.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
Where the idea comes from
Ethereum’s Web3 page frames Web3 as an evolution of the web toward ownership: users control keys, and on-chain settlement reduces reliance on a single platform holding the canonical record. Earlier web eras are often summarised as static pages (Web1) and platform-driven social apps (Web2). Web3 is the marketing and community shorthand for building more of that stack on crypto rails.
What people usually mean in practice
Day to day, Web3 often means connecting a self-custody wallet to a dapp, holding tokens or NFTs, and using DeFi or on-chain governance. Under the hood that involves blockchains, smart contracts and sometimes DAOs. A product can have a Web3 login and still keep critical servers, admin keys and customer data in a company cloud.
Debates and limitations
Critics argue the term is vague, that many apps are only partly decentralised, and that user-experience and scam risks remain high. Supporters argue self-custody and open settlement create options platforms cannot freeze as easily. Both can be true at once: the infrastructure is real, and the label is often applied loosely.
How we use the term
In Collective Shift education we prefer concrete mechanisms (wallet, chain, contract, custody) over the buzzword alone. When a team says their product is Web3, the useful questions are who holds the keys, who can change the rules, where the data lives and what happens if the website disappears. Those answers matter more than the badge.
Frequently asked questions
Is Web3 the same as crypto?
Closely related, but not identical. Crypto usually means the assets and chains. Web3 usually means apps and experiences built so users interact with those chains through wallets.
Do I need crypto to use Web3 apps?
Most Web3 apps expect a wallet and some native tokens to pay fees. A few abstract that away, but settlement still happens on a chain underneath.
Is Web3 only Ethereum?
No. The term is used across many chains. Ethereum popularised much of the dapp vocabulary, and other networks copied similar wallet-and-contract patterns.
Related guides
Whitelist
A pre-approved list of participants that are allowed access to a token sale.
Whitepaper
A document prepared by a project’s founders detailing the problem the project addresses and how a blockchain-based cryptocurrency is fundamental to said project’s existence.
Y
Yield
Income return of a financial asset. Yield is typically expressed as a percentage.
Yield farming
Yield farming: Yield farming is the practice of putting crypto into decentralised finance protocols to earn rewards, most often by providing liquidity or depositing into lending markets. Rewards may be paid in trading fees, interest or the protocol’s own token. The headline percentage can look high, and the risks, including smart contract failure and token price drops, are real.
By Matt Willemsen, Director of Research, reviewed by Ben Simpson. Updated November 2026. General education only.
How yield farming works
A user deposits tokens into a DeFi dapp, often a liquidity pool on a decentralised exchange or a lending market. In return they receive pool tokens or a balance that accrues rewards. Ethereum’s DeFi overview groups these apps under decentralised finance: lending, trading and similar services running through smart contracts rather than a single bank or broker.
Where the yield comes from
Some yield is fee income, such as a share of swap fees paid to liquidity providers. Some is interest paid by borrowers. Some is new protocol tokens issued as an incentive, which can dilute holders if emissions stay high. When the reward token falls in price, a large advertised APY can shrink quickly in dollar terms. Always separate fee yield from incentive yield when you read a dashboard.
Main risks
Smart contracts can be exploited. Liquidity providers can face impermanent loss when token prices diverge. Incentive tokens can lose value. Approving a malicious or buggy contract can put other wallet balances at risk. Complex farms that route through several protocols stack those risks. High advertised yields are not a measure of safety.
How to think about it as an investor
Yield farming is active risk-taking in DeFi, not a savings account. Compare the source of yield, audit history, who controls upgrades and how easily you can exit. Our research team treats farm APYs as temporary market incentives until proven otherwise by fee income alone. For Australian tax, rewards can be assessable when you receive them. This is general information, not tax or financial advice.
Frequently asked questions
Is yield farming the same as staking?
Not usually. Staking typically locks coins to help secure a proof of stake network. Yield farming usually means depositing into DeFi apps for fees or incentive tokens. Some products blur the labels, so read the mechanism.
What is impermanent loss?
It is the difference between holding two tokens in a liquidity pool versus simply holding them in your wallet when prices change. The loss is realised when you withdraw and prices have diverged.
Are high APYs sustainable?
Often not when most of the yield is a new token being emitted. Fee-based yield can be more durable, but it still depends on trading volume and can fall.
Related guides
Z
Zero-knowledge proof
An encryption scheme used to prove to someone that you know something without revealing what that something actually is.
Frequently asked questions
What does DYOR mean?
DYOR stands for do your own research. It’s a reminder to check a project yourself, its team, its revenue and its risks, before you put money in, rather than relying on someone else’s post or video.
What is the difference between a coin and a token?
A coin is native to its own blockchain, like BTC on Bitcoin or ETH on Ethereum. A token is built on top of an existing blockchain, like the ERC-20 tokens on Ethereum, so it depends on the chain it lives on.
What is a seed phrase?
A seed phrase, or recovery phrase, is a list of usually 12 or 24 words that backs up your wallet. Anyone with those words can take your crypto, so write it down offline, store it safely and never type it into a website.