Reference

Glossary of crypto P&L and tax terms.

The vocabulary that turns up in CoinTracker, Koinly, and TaxBit reports plus the on-chain terms you'll encounter in DeFi. Each entry is short and links to longer treatment where one exists.

Airdrop: Free tokens distributed to addresses meeting specified criteria. Generally taxable as ordinary income at fair market value when received. See the tax events page.
AMM: Automated Market Maker. A DEX algorithm that prices token swaps based on a constant-product or similar formula, rather than an order book. Uniswap is the canonical example.
Bridge: A protocol that moves tokens between blockchains. Charges a bridge fee, often 0.1–0.3 % on canonical bridges and substantially more on lesser bridges.
CBP: Certified Bitcoin Professional. The professional designation administered by the CryptoCurrency Certification Consortium (C4).
CEX: Centralised Exchange. Coinbase, Binance, Kraken. Holds custody of user funds in exchange for fiat on/off-ramps and trading services.
Cost basis: The price at which an asset was acquired, plus fees. The reference against which capital gains/losses are measured at sale. See the cost basis page.
DEX: Decentralised Exchange. Uniswap, Curve, dYdX. Trades execute against on-chain liquidity pools rather than a centralised order book.
FIFO: First In, First Out. The default cost-basis method in most jurisdictions: sales are matched against the oldest holdings.
Gas: The fee paid to validators/miners for processing an on-chain transaction. Denominated in the chain's native token. See the fees page.
Hard fork: A blockchain protocol upgrade that creates two distinct chains (e.g., BTC→BCH in 2017, ETH→ETC in 2016). Holders of the original token typically receive the equivalent amount on both chains.
HIFO: Highest In, First Out. A cost-basis method that matches sales against the most expensive lot still in inventory, minimising near-term reported gains.
Impermanent loss (IL): The opportunity cost of providing liquidity to an AMM vs. holding the underlying tokens. Becomes “permanent” only at LP exit.
L2 (Layer 2): A blockchain that derives security from a base-layer chain (typically Ethereum) while processing transactions more cheaply. Arbitrum, Optimism, Base.
LP: Liquidity Provider. A user who deposits two tokens into an AMM pool to earn a share of trading fees.
MEV: Maximal Extractable Value. The profit a block producer can extract by reordering, including, or excluding transactions in a block. Captured by specialised bots; relevant to retail because it's a hidden cost in DEX swaps.
Mining: Proof-of-work block production. Mining rewards are taxable as ordinary income at fair market value when received.
NFT: Non-Fungible Token. A unique on-chain asset, distinct from fungible tokens like ETH or USDC. Subject to special tax treatment in some jurisdictions (the US classifies some NFTs as collectibles, with higher CGT rates).
On-chain: Recorded on a blockchain (and therefore publicly verifiable). Distinguishes from “off-chain” activity such as exchange-internal transfers.
Proof of reserves: An attestation that a centralised exchange holds customer funds in segregated wallets matching customer balances. Critical post-FTX for evaluating CEX custody.
Rug pull: A scam in which a token's developers exit with the liquidity pool's funds, rendering the token worthless. Concentrated in smaller-cap DEX-listed tokens.
Self-custody: Holding private keys yourself, typically via a hardware wallet. Eliminates exchange-failure risk; introduces key-management risk. See the custody page.
Slippage: The difference between the displayed swap price and the realised price. Material for large DEX swaps in low-liquidity pools.
Specific identification: A cost-basis method allowing the seller to choose which specific lot is being sold. Most flexible, most documentation-intensive.
Staking: Locking tokens to support network consensus and earn rewards. Rewards are taxable as ordinary income at receipt.
Wash sale: Selling at a loss and repurchasing identical assets within a short window. Disallowed for tax-loss harvesting in equities (US 30-day rule); historically not applied to crypto in the US, though legislation has periodically been proposed to extend it.