Crypto Glossary

A

Address Crypto

A public identifier, derived from a public key, that others use to send crypto to a wallet. Safe to share; the private key is not.

Adjusted cost base (ACB) Tax

What you paid for a property, including commissions and fees, used to work out your gain or loss. In Canada identical properties are pooled at their average cost. Read more

Airdrop Crypto

Tokens distributed to wallets for free, often to promote a new project. Depending on why you received them, they may be taxable income.

Altcoin Crypto

Any cryptocurrency other than Bitcoin.

Average cost method Tax

The Canadian way of costing identical properties: every unit in the pool carries the pool's total cost divided by the units held. Read more

B

Bear market Investing

A prolonged fall in prices, commonly defined as 20% or more from a recent high.

Benchmark Investing

An index or fund used to judge a portfolio's performance, such as SPY for US large-cap stocks.

Beta Investing

How much an investment moves for each 1% move in its benchmark. A beta of 1.5 moves about 50% more than the market.

Bitcoin (BTC) Crypto

The first cryptocurrency, launched in 2009, with a fixed maximum supply of 21 million coins.

Block Crypto

A batch of transactions added to a blockchain. Each block references the one before it, which is what makes the history hard to alter.

Blockchain Crypto

A shared, append-only ledger of transactions maintained by a network of computers rather than a single company.

Bull market Investing

A prolonged rise in prices.

C

Capital gain Tax

The profit when you dispose of property for more than its adjusted cost base and selling costs. In Canada half of a capital gain is taxable. Read more

Capital loss Tax

The loss when you dispose of property for less than its adjusted cost base. It offsets capital gains and can be carried back three years or forward indefinitely. Read more

Cold wallet Crypto

A wallet whose private keys are kept offline, such as a hardware device. Safer against hacks than a hot wallet.

Custodial Crypto

An arrangement where a company, usually an exchange, holds the private keys to your crypto for you.

D

DeFi (decentralized finance) Crypto

Lending, trading and other financial services run by smart contracts on a blockchain instead of by banks or brokers.

DEX (decentralized exchange) Crypto

An exchange that lets users trade directly from their own wallets through smart contracts, with no company holding the funds.

Disposition Tax

Selling, trading, gifting or otherwise parting with property. A crypto-to-crypto trade is a disposition. Read more

Drawdown Investing

The fall from a portfolio's highest value to a later low. Maximum drawdown is the worst such fall over a period.

E

Ethereum (ETH) Crypto

A blockchain that runs smart contracts, and its native currency, ether. Much of DeFi and most NFTs are built on it.

Exchange Crypto

A platform for buying, selling and trading crypto, such as a centralized exchange (Coinbase, Kraken) or a DEX.

F

Fair market value (FMV) Tax

The price a property would sell for between willing, unrelated parties. Used for crypto-to-crypto trades, gifts and income received in crypto.

Fiat currency Crypto

Government-issued money such as the Canadian or US dollar.

G

Gas fee Crypto

The fee paid to process a transaction on a blockchain such as Ethereum. Fees paid to buy or sell are part of your cost or selling costs.

H

Halving Crypto

The roughly four-yearly event that cuts Bitcoin's new-coin reward to miners in half.

Hard fork Crypto

A change to a blockchain's rules that splits it in two, sometimes creating a new coin for existing holders.

Hot wallet Crypto

A wallet connected to the internet, such as a mobile or browser wallet. Convenient but more exposed to hacks.

I

Inclusion rate Tax

The share of a capital gain that is added to taxable income. It is currently 50% in Canada.

K

KYC (know your customer) Crypto

The identity checks regulated exchanges and brokers must perform before you can trade.

L

Liquidity pool Crypto

Tokens locked in a smart contract so others can trade against them on a DEX. Providers earn a share of the fees.

M

Market capitalization Investing

The total value of a company's shares or a coin's supply: price multiplied by units outstanding.

Mining Crypto

Using computing power to validate transactions on a proof-of-work blockchain in exchange for newly created coins. Rewards are generally taxable income.

N

NFT (non-fungible token) Crypto

A unique token recording ownership of a specific item, such as digital art. Buying and selling NFTs has the same tax treatment as other crypto.

P

Private key Crypto

The secret that controls a wallet's funds. Anyone with it can move your crypto, and losing it usually means losing the funds.

Proceeds of disposition Tax

What you received when you disposed of property, before subtracting its cost base. For a crypto-to-crypto trade, it is the fair market value of what you received.

Proof of stake Crypto

A way of securing a blockchain where validators lock up (stake) coins instead of spending computing power. Used by Ethereum.

Proof of work Crypto

A way of securing a blockchain where miners compete to solve computational puzzles. Used by Bitcoin.

R

Realized gain Investing

A gain locked in by selling. Only realized gains and losses are taxed; a rise in value you haven't sold is unrealized.

S

Schedule 3 Tax

The part of the Canadian T1 return where you report capital gains and losses for the year. Read more

Seed phrase Crypto

A list of 12 or 24 words that can restore a wallet and all its keys. Store it offline and never share it.

Self-custody Crypto

Holding your own private keys rather than leaving crypto on an exchange.

Sharpe ratio Investing

Return per unit of volatility. Higher means more return for the ups and downs endured.

Smart contract Crypto

Code stored on a blockchain that runs automatically when its conditions are met.

Sortino ratio Investing

Like the Sharpe ratio, but it only counts downside volatility as risk.

Stablecoin Crypto

A token designed to hold a steady value, usually one US dollar, such as USDC. Trading into a stablecoin is still a disposition.

Staking Crypto

Locking coins to help secure a proof-of-stake blockchain in exchange for rewards. Rewards are generally taxable income when received. Read more

Superficial loss Tax

A loss the CRA denies because you, or someone affiliated with you, bought the same property back within 30 days before or after the sale and still held it 30 days after. Read more

T

T1135 Tax

The form Canadians file when their specified foreign property, including US shares, cost more than $100,000 at any point in the year. Read more

T5008 Tax

The slip Canadian brokers issue for securities you sold. It often shows a missing or incorrect cost, so check it against your own records. Read more

TFSA Tax

Tax-Free Savings Account. Growth and withdrawals are tax-free, but losses inside it can't be claimed. Can hold crypto ETFs but not crypto directly. Read more

Time-weighted return Investing

A return measure that ignores deposits and withdrawals, so it reflects how the investments performed rather than how much money was added.

Token Crypto

A crypto asset issued on an existing blockchain, as opposed to the chain's native coin. USDC is a token on Ethereum.

U

Unrealized gain Investing

An increase in value on something you still hold. It isn't taxed until you dispose of it.

V

Volatility Investing

How much an investment's price swings, usually measured as the annualized standard deviation of its daily returns.

W

Wallet Crypto

Software or a device that stores private keys and lets you send and receive crypto.

Wrapped token Crypto

A token that represents another asset on a different blockchain, such as wrapped bitcoin (WBTC) on Ethereum.

Y

Yield farming Crypto

Moving crypto between DeFi protocols to earn the highest rewards. Each move can be a taxable disposition.

Definitions are general information, not tax advice. For how these rules apply to your trades, see the Tax Guide.