CRYPTO TAX GLOSSARY

A distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses. Airdrops are primarily implemented as a way of gaining attention and new followers, resulting in a larger user-base and a wider disbursement of coins.

The original value of an asset for tax purposes, usually the purchase price, adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value.

A system by which financial products become available on a public decentralized blockchain network. That makes them open to anyone to use, rather than going through middlemen like banks or brokerages.

The price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

Payments made by users to compensate for the computing energy required to process and validate transactions on the blockchain.

A misspelling of 'hold' that refers to a buy-and-hold strategy in the context of bitcoin and other cryptocurrencies.

Describes the temporary loss of funds occasionally experienced by liquidity providers because of volatility in a trading pair.

The process of a business verifying the identity of its clients and assessing their suitability, along with the potential risks of illegal intentions towards the business relationship.

A collection of funds locked in a smart contract. Liquidity pools are used to facilitate decentralized trading, lending, and many more functions.

The process by which new cryptocurrency coins are entered into circulation and the way that the network confirms new transactions. It is a critical component of the maintenance and development of the blockchain ledger.

A unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership.

A malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors' funds.

The process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, it consists of locking cryptocurrencies to receive rewards.

The practice of selling a security that has experienced a loss. By realizing, or 'harvesting' a loss, investors are able to offset taxes on both gains and income.

A transaction where an investor sells a losing security to claim a capital loss, only to repurchase it (or a substantially identical security) again within 30 days of the sale.

An investment strategy in decentralized finance (DeFi) that involves lending or staking cryptocurrency coins or tokens to get rewards in the form of transaction fees or interest.