Definitions written for someone choosing where to keep money, not sitting an exam. Each entry says what the term means and what it costs to ignore it.
26 terms · 5 groups
The platform holds the private keys, not you.
Every ordinary exchange account is custodial. It is convenient and recoverable if you lose your password — and it means your coins are an entry in someone else’s ledger. If the platform fails, you are a creditor, not an owner.
You hold the keys; nobody can move the funds but you.
No password reset, no support line, no recovery. That is the trade: nobody can freeze or lose your funds, including you-if-you-lose-the-seed-phrase.
The 12 or 24 words that reconstruct a wallet.
Whoever has the words has the money — the wallet software is just a viewer. Anyone asking you to type it anywhere, for any reason, is stealing from you. There is no legitimate exception.
Keys kept on a device that never touches the internet.
A hardware wallet or an offline machine. It removes the entire class of remote attacks and adds a physical one: lose the device and the backup, lose the funds.
A wallet connected to the internet.
Necessary for anything you actually trade with. Exchanges keep a small share of assets hot for withdrawals and the rest cold — the hot share is what gets drained in a hack.
Centralised exchange — a company matching orders and holding funds.
Fast, liquid and legally accountable somewhere. You get an account, identity checks and a support line, and you accept counterparty risk in exchange.
Decentralised exchange — trades settle on-chain from your own wallet.
No account and no custody, so no exchange failure can take your funds. In return you pay network fees, face thinner liquidity on most pairs, and have nobody to appeal to when a transaction goes wrong.
The live list of buy and sell offers at each price.
Its depth is what decides whether a large order moves the price. A pair can look tradeable and still be nearly empty two percent away from the top of the book.
How much can be traded without moving the price.
The single most underrated number when comparing platforms. A low headline fee on an illiquid pair costs more than a higher fee on a deep one, because the loss shows up in the fill price instead of the fee line.
Buy or sell immediately at whatever price is available.
Guarantees execution, not price. On a thin book it can fill far from the number you saw a second earlier.
Buy or sell only at your price or better.
Guarantees price, not execution. It usually also earns the cheaper fee tier, because it adds depth to the book instead of removing it.
The fee when your order sits on the book and waits.
You added liquidity, so the platform charges less — sometimes nothing. Comparing exchanges on the taker fee alone hides this entirely.
The fee when your order fills against what is already there.
You removed liquidity, so it costs more. It is the fee most people actually pay, and the one worth comparing.
The gap between the best buy and best sell price.
A cost you pay without seeing a line item for it. On illiquid pairs the spread routinely exceeds every stated fee combined.
The difference between the expected price and the filled one.
Grows with order size and shrinks with liquidity. It is the reason a "zero-fee" platform is not automatically cheaper — the cost simply moved from the fee to the fill.
A flat charge for moving coins off the platform.
Set by the exchange, not by the network, and it varies wildly between platforms for the same asset. For small balances it can dwarf every trading fee you paid to get there.
What the blockchain itself charges to process a transaction.
Paid to the network, not the exchange, and it moves with congestion. It is why moving a small amount on a busy chain can cost more than the amount is worth.
Know Your Customer — identity verification before you can trade.
Required almost everywhere that touches bank money. It is also the thing that ties your name to every transaction on that account, permanently, regardless of what happens to the company later.
Anti-money-laundering rules the platform must follow.
The reason withdrawals get held and accounts get frozen without a satisfying explanation. Understanding that the freeze is usually procedural, not personal, does not make it faster.
US deposit insurance — for dollars in a bank, never for crypto.
Worth stating plainly because the label gets misused in marketing. If an exchange holds your USD at an insured partner bank, those dollars may be covered up to the limit. Your coins are not covered by anyone, ever, and a failed exchange is not a failed bank.
A published attestation that customer assets are actually held.
Useful and incomplete. Most versions prove assets exist at a moment in time and say nothing about liabilities, so an exchange can pass while being insolvent. Read whether liabilities were included; usually they were not.
A second login factor beyond the password.
An authenticator app or hardware key, not SMS — SIM-swap attacks exist precisely because SMS codes are transferable. This is the single cheapest thing that stops account takeover.
Restricting withdrawals to addresses you approved in advance.
With a delay on adding new addresses, it turns a compromised account from an instant loss into a race you can win. Almost nobody enables it before the first scare.
A token designed to hold a fixed value, usually one dollar.
What backs it decides what it is worth under stress: cash and short-term treasuries is one thing, an algorithm is another. The peg holds until it does not, and the difference is in the reserves, not the branding.
Locking coins to help secure a network, in exchange for a yield.
The advertised rate is gross. What matters is the platform’s cut, whether funds are locked and for how long, and whether the yield is paid in the same asset — a high rate in a falling token is not income.
The platform lending out assets you deposited.
It is how some yields get funded. It also means your balance depends on someone else repaying, which is exactly the mechanism behind several exchange collapses. If a return has no stated source, this is usually the source.
No blockchain theory. Nothing here explains how consensus works, because knowing that has never once changed which exchange someone should use. This list covers the terms that decide what you pay, what you own and what you lose — and stops there.