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Altcoin is a catch-all term for any cryptocurrency that is not Bitcoin. The word is short for alternative coin. Ethereum, Solana, XRP and Cardano are examples of large altcoins. The label is mainly used by traders and is not a technical classification, and inclusion in the group says nothing about a project's quality, risk profile or regulatory status.
Bitcoin is the first cryptocurrency, launched in 2009 by the pseudonymous Satoshi Nakamoto. It is a decentralised payment network with no central bank, where transactions are verified by a global network of computers and recorded on a public blockchain. Bitcoin has the largest market capitalisation of any crypto-asset and the longest track record, and is used today both as a speculative investment and as a digital store of value.
A blockchain is a distributed database in which data is stored in blocks that are cryptographically linked together. Each block contains a batch of transactions and a hash of the previous block. Altering historical data would require recomputing every following block, which is effectively impossible on a live network. This makes the chain tamper-evident and removes the need for a trusted central record-keeper.
A coin is a cryptocurrency that runs on its own native blockchain. Bitcoin (BTC) and Ether (ETH) are coins. Assets that live on another network are tokens, not coins, in the strict sense. In everyday speech the word is often used loosely for any unit of crypto, and exchanges typically list coins and tokens side by side without distinction.
A cryptocurrency is a digital asset secured by cryptography and transferred over a decentralised network. It does not require a central bank or intermediary to function, and its value is set by supply and demand on open markets. HMRC refers to these assets as cryptoassets and treats them as property for Capital Gains Tax purposes. Bitcoin and Ethereum are the largest, but thousands of cryptocurrencies exist for different purposes.
A memecoin is a cryptocurrency driven primarily by viral culture and speculation rather than technical utility. Dogecoin, Shiba Inu and Pepe are well-known examples. Memecoins can rise thousands of per cent in days and fall just as fast, with thin liquidity amplifying both moves. The risk of total loss is high and often only becomes obvious after the price has already collapsed.
A stablecoin is a cryptocurrency designed to hold a steady value, usually pegged 1:1 to the US dollar or another fiat currency. Backing can be fiat reserves (USDC, USDT), other crypto (DAI) or algorithmic, though algorithmic designs have a history of collapse such as Terra/UST in 2022. Stablecoins are widely used for trading, payments and saving without fiat exposure.
A token is a unit of value that lives on an existing blockchain, most often Ethereum. Tokens differ from coins such as Bitcoin or ETH because they do not run their own blockchain and instead rely on a host network. ERC-20 and BEP-20 are the most common token standards. Stablecoins like USDT and USDC are the most widely used token type in everyday trading.
The 30-day rule, sometimes called the bed-and-breakfasting rule, says that if you dispose of a cryptoasset and buy back the same asset within the following 30 days, the disposal is matched against that later acquisition rather than the Section 104 pool. It is applied after the same-day rule and before pooling. The rule prevents investors from crystallising losses or gains and immediately re-entering the same position.
The Annual Exempt Amount is the amount of net capital gains an individual can realise each tax year before Capital Gains Tax becomes payable. For the 2025/26 and 2026/27 tax years it is set at £3,000, down from £12,300 in 2022/23. Any gains above the allowance are taxed at 18 per cent within the basic-rate band and 24 per cent above it. The allowance cannot be carried forward.
Bed and breakfasting refers to selling an asset and buying it back almost immediately to crystallise a gain or loss for tax purposes without giving up the position. UK rules counter this with the same-day and 30-day matching rules, which force the disposal to be matched against the repurchase rather than the Section 104 pool. The practical effect is that simply selling and buying back rarely produces the intended tax outcome.
Capital Gains Tax is the UK tax on profits from disposing of chargeable assets, including cryptoassets. For 2026, gains above the Annual Exempt Amount are taxed at 18 per cent within the basic-rate band and 24 per cent above it. A disposal includes selling for fiat, swapping one cryptoasset for another, spending crypto on goods or services, and giving crypto away to anyone other than a spouse or civil partner.
Cost basis is what you paid to acquire a cryptoasset, including transaction fees, and is used to work out the gain or loss when you later dispose of it. For example, buying 1 ETH for £2,000 plus a £10 fee gives a cost basis of £2,010. Under UK rules, costs for the same token are pooled in a Section 104 holding and matched against disposals using a fixed order of rules.
A disposal is the chargeable event that triggers a Capital Gains Tax calculation. For cryptoassets, HMRC treats the following as disposals: selling for fiat, exchanging one cryptoasset for another, using crypto to pay for goods or services, and gifting crypto to anyone other than a spouse or civil partner. Simply holding crypto is not a disposal, and transfers between your own wallets are not disposals either.
HMRC, His Majesty's Revenue and Customs, is the UK tax authority responsible for collecting taxes and enforcing tax law. HMRC treats cryptoassets as property rather than currency, with disposals generally falling under Capital Gains Tax and certain activities such as mining or staking under Income Tax. Crypto holdings, gains and income must be reported through Self Assessment, and HMRC receives data directly from UK and overseas exchanges.
SA108 is the Capital Gains Summary supplementary page of the Self Assessment tax return. It is where individuals report disposals of chargeable assets, including cryptoassets, along with proceeds, allowable costs and the resulting gain or loss. Crypto disposals are reported in the "other property, assets and gains" section. You also need to attach a computation showing how each gain or loss has been calculated using share-pooling rules.
The same-day rule says that if you sell and buy back the same cryptoasset on the same day, the disposal is matched against that day's acquisition rather than the Section 104 pool. It is the first rule applied in the UK matching order. The aim is to stop short-term wash trading from generating artificial gains or losses. Any units left over after same-day matching move on to the 30-day rule.
Self Assessment is the UK system through which individuals report income and gains that are not collected automatically through PAYE. Crypto investors use it to declare capital gains, miscellaneous income from staking, mining or airdrops, and any other untaxed income. The online deadline is 31 January following the tax year, and payment is due on the same date. Late filing and late payment both attract automatic penalties and interest.
Share pooling is the UK method for tracking the cost of fungible assets such as cryptoassets. All units of the same token are combined into a Section 104 pool with a single average cost. When you dispose of some of the holding, the gain is calculated using the pool's average cost per unit. The same-day rule and the 30-day rule take priority over the pool when their conditions apply.
The trading allowance is a £1,000 tax-free allowance for casual or miscellaneous trading and other income in the UK. Small amounts of crypto-related side income, such as occasional mining or modest staking rewards, can fall within this allowance and may not need to be reported. If gross income from this kind of activity exceeds £1,000 in a tax year, it must be declared on Self Assessment in full.
A voluntary disclosure is a route to tell HMRC about previously unreported income or gains, including crypto, before HMRC opens an enquiry of its own. HMRC runs a dedicated cryptoasset disclosure service for this purpose. Coming forward voluntarily generally reduces penalties significantly compared with being caught, and HMRC increasingly cross-checks Self Assessment data against information received directly from exchanges.
Consensus is the mechanism a blockchain network uses to agree on which transactions are valid and the current state of the ledger. Proof of Work and Proof of Stake are the two most common designs. Without a central authority, participants need a rules-based way to reach agreement, and the consensus mechanism is what prevents double-spending and keeps the network's history consistent across all nodes.
Gas is the fee paid to execute a transaction or run a smart contract on a blockchain. On Ethereum, gas is paid in ETH or in a smaller denomination called gwei. The gas price varies with network demand and can range from a few pence to tens of pounds for a single transaction during periods of congestion. Layer 2 networks were built largely to reduce gas costs.
The halving is the scheduled event in which the block reward paid to Bitcoin miners is cut in half. It occurs roughly every four years, or every 210,000 blocks. The halving slows the rate at which new bitcoin enter circulation and has historically been associated with price rallies in the months that follow. The most recent halving took place in April 2024; the next is expected around 2028.
A hash is a unique cryptographic fingerprint of input data, always the same fixed length regardless of input size. Even a tiny change to the input produces a completely different hash. Hashes are used to link blocks together, sign transactions, verify file integrity and store passwords securely. Bitcoin's mining process is built around finding inputs that produce a hash with a specific pattern.
Mining is the process by which computers validate transactions and add new blocks to a Proof of Work blockchain. As a reward, the miner receives newly issued cryptocurrency plus the transaction fees in the block. On Bitcoin the block reward halves roughly every four years in an event called the halving. Mining at a profit usually requires specialised ASIC hardware and access to cheap electricity.
A node is a computer that takes part in a blockchain network. Nodes store a copy of the chain, validate transactions against the network's rules and relay data to other nodes. Bitcoin has tens of thousands of nodes spread around the world, and that geographic distribution is what makes the network censorship-resistant. Anyone with a modest computer and an internet connection can run one.
Proof of Stake is a consensus mechanism in which validators lock up, or stake, cryptocurrency as collateral that they will validate honestly. It uses far less energy than Proof of Work because it relies on economic stake rather than computation. Ethereum switched to Proof of Stake in 2022 in an upgrade known as The Merge. Solana, Cardano and Avalanche also use variants of this design.
Proof of Work is a consensus mechanism in which computers known as miners compete to solve cryptographic puzzles in order to validate transactions and add new blocks. The process consumes substantial electrical energy. Bitcoin uses Proof of Work, and the cost of mining is what makes the network extremely difficult and expensive to manipulate, since an attacker would need to outspend honest miners across the whole network.
A smart contract is code that runs on a blockchain and executes automatically when its conditions are met. Smart contracts remove the need for an intermediary by making agreements self-executing and verifiable on-chain. Ethereum was the first blockchain to offer general-purpose smart contracts at scale, and the model has since spread to most major networks including Solana, Avalanche and Polygon.
An address is a long string of letters and numbers that identifies a wallet on a blockchain. Bitcoin addresses, for example, start with 1, 3 or bc1. You can safely share your address to receive funds, but always double-check before sending: a single mistyped character means the transaction goes somewhere else and is, on most chains, irreversible. Most wallets let you save trusted addresses to reduce that risk.
A cold wallet is a wallet that is kept entirely offline, typically a hardware wallet or a paper wallet. Because it is never connected to the internet, it cannot be attacked remotely. Cold wallets are used for long-term storage of larger holdings. Their counterpart is the hot wallet, which is online and used for everyday transactions, and most users combine the two for convenience and safety.
A hardware wallet is a physical device that stores your private keys offline and only signs transactions while connected. It protects against malware and remote attacks on your computer because the keys never leave the device. Ledger and Trezor are the most widely used brands. A hardware wallet is generally recommended once your holdings are large enough that exchange or hot-wallet risk would be material.
A hot wallet is a wallet connected to the internet and immediately available for use. It is convenient for frequent transactions but more exposed to malware and phishing than a cold wallet. MetaMask, Trust Wallet and exchange-hosted wallets are common examples. A standard precaution is to keep only small operating balances in a hot wallet and move longer-term holdings to a hardware or other cold wallet.
Multisig, short for multi-signature, is a wallet that requires more than one key to authorise a transaction. Common setups are 2-of-3 or 3-of-5. Companies, funds and security-conscious individuals use multisig so that the loss or compromise of any single key does not put the funds at risk. UK tax treatment of multisig holdings follows the normal cryptoasset rules; the wallet structure does not change who is the beneficial owner.
A private key is the secret value that proves ownership of a blockchain address and is used to sign transactions. If you lose the private key you lose access to the funds permanently; there is no forgotten-password flow on a public blockchain. A wallet's seed phrase deterministically generates its private keys, which is why protecting the seed phrase is the most important security step.
A public key is the openly shareable value that is mathematically derived from a private key. It is used to receive cryptocurrency and to verify signatures created with the matching private key. Sharing a public key is safe and does not put your funds at risk. Blockchain addresses are usually a shortened hash of the public key rather than the public key itself.
A seed phrase is a sequence of 12 or 24 words that acts as the complete backup of your wallet. Anyone who knows the seed phrase controls the wallet and can move the funds. Write it on paper, keep two copies in safe physical locations, and never store it on a computer or in cloud storage. HMRC, your bank and legitimate support staff will never ask you for it.
A wallet is software or hardware that stores cryptographic keys and lets you sign transactions. A wallet does not actually hold your cryptocurrency, which lives on the blockchain; it holds the keys that prove you own it. If you lose those keys you lose access to the crypto, with no central support line to recover them. Wallets come in hot (online) and cold (offline) varieties.
An airdrop is a free distribution of a new cryptocurrency to wallets that meet certain criteria, often previous use of a related protocol. Airdrops are commonly used to market a project at launch. In the UK, HMRC's position is that an airdrop received without doing anything in return is generally not taxable on receipt, while one earned through some kind of activity is treated as miscellaneous income at its sterling value.
ATH stands for all-time high, the highest price a cryptocurrency has ever reached. It is widely used as a reference point in technical analysis and headline writing. Bitcoin has set fresh all-time highs in each major bull cycle since 2013. A sustained move above the previous ATH is often interpreted as confirmation that a new bull market is under way, though it offers no guarantee.
A bear market is a sustained period of falling prices and pessimistic sentiment, often defined as a drop of at least 20 per cent from the recent peak. Crypto bear markets can last one to two years and frequently see drawdowns of 70 per cent or more from the top. Many experienced investors use bear markets to accumulate gradually and take profit during the next bull cycle.
A bull market is a sustained period of rising prices and optimistic sentiment. Bitcoin has been through several clearly defined bull markets since 2009, often broadly correlated with the four-year halving cycle. Bull markets in crypto typically last 12 to 18 months before giving way to a bear market. They tend to attract a wave of new retail participants near the top, just as risk is highest.
CeFi, short for centralised finance, refers to crypto lending, saving and trading offered by companies such as the now-collapsed Celsius, BlockFi and Voyager, alongside surviving operators like Nexo. CeFi platforms hold customer funds and run as traditional financial businesses. Several major CeFi firms went bankrupt in 2022, leaving customers as unsecured creditors. DeFi is the non-custodial counterpart and shifts the risk profile rather than removing it.
CEX stands for centralised exchange, a crypto trading platform that holds customer funds and operates much like a traditional broker. You complete KYC checks and entrust the exchange with custody of your assets. Examples include Binance, Coinbase, Kraken and Bitstamp. UK-facing CEXs must register with the FCA for anti-money-laundering supervision and report relevant data to HMRC under the Crypto-Asset Reporting Framework.
DeFi, short for decentralised finance, is the umbrella term for financial services such as lending, saving, trading and derivatives built on blockchains without traditional intermediaries. DeFi protocols run as smart contracts and users keep custody of their own assets. The space has grown rapidly since 2020, alongside a steady stream of exploits and protocol failures, so smart-contract risk is a permanent feature.
DEX stands for decentralised exchange, a trading venue that runs as smart contracts on a blockchain. You keep your own private keys and trade directly from your wallet, with no account creation and no custodian holding your funds. Uniswap, PancakeSwap and dYdX are well-known examples. Trades on a DEX are still taxable disposals in the UK, even though no centralised business is involved in the transaction.
A cryptocurrency exchange is a platform where you can buy, sell and trade crypto-assets. Centralised exchanges (CEX) such as Coinbase, Kraken and Binance hold customer funds and operate as regulated financial businesses. Decentralised exchanges (DEX) such as Uniswap are smart-contract protocols where you keep custody of your own keys throughout the trade, with no account or KYC step.
FOMO stands for Fear Of Missing Out, the urge to buy because prices are rising fast and others appear to be making money. FOMO drives many participants to enter near the top of a bull cycle, when risk is highest. A disciplined, long-term strategy such as pound-cost averaging into a fixed allocation is the most common antidote and avoids the worst of the timing trap.
FUD stands for Fear, Uncertainty and Doubt and describes negative news or rumours that weigh on a cryptocurrency's price. The term is often used by holders to dismiss criticism, but real risks and genuine bad news also routinely get labelled FUD. Whether a piece of information is FUD or sound analysis usually only becomes clear with hindsight, so it pays to look at the underlying evidence rather than the label.
HODL is crypto slang for holding an asset long term regardless of price swings. It originated in a misspelled forum post from 2013 with the title "I AM HODLING" and was later backronymed to Hold On for Dear Life. The term captures a buy-and-hold approach popular among long-term Bitcoin investors and is often contrasted with active trading or short-term speculation.
A liquidity pool is a smart contract that holds two or more cryptocurrencies and uses them to facilitate trades on a decentralised exchange. Users who deposit into the pool are called liquidity providers and earn a share of trading fees. The main risk is impermanent loss, which arises when the relative price of the deposited assets moves and leaves the LP worse off than if they had simply held them.
Market cap is the total value of a cryptocurrency, calculated as price multiplied by circulating supply. It is used to compare relative size between assets. Bitcoin has by far the largest market cap of any crypto-asset. Comparing a small token's market cap to a small-cap equity can be misleading, since liquidity is usually far thinner in crypto and large orders can move the price significantly.
An NFT, or non-fungible token, is a unique token on a blockchain that represents ownership of a specific digital or physical asset, typically art, music or collectibles. In the UK, buying and selling NFTs is treated as a disposal of a chargeable asset for Capital Gains Tax. NFTs that generate income, such as royalty streams, may also produce miscellaneous income that needs to be reported separately.
A pump and dump is market manipulation in which a group buys a thinly traded cryptocurrency, hypes it on social media, and then sells into the buying pressure of those who arrive on the way up. The retail buyers are left holding a rapidly falling asset. The practice is banned for in-scope crypto-assets in the EU under MiCA and is treated as market abuse by the FCA in the UK.
A rug pull is a scam in which the developers of a new crypto project disappear with investors' money after the price has been pumped up. Rug pulls are most common in memecoins and obscure DeFi protocols. Typical warning signs include anonymous teams, no independent audit, unrealistic yield promises and contract code that lets the team mint or withdraw without limit. Losses are almost never recoverable.
Slippage is the difference between the price you expected on a trade and the price you actually received. It is most visible on decentralised exchanges when an order is large relative to pool liquidity, or on illiquid tokens. Most trading interfaces let you set a maximum acceptable slippage; if the market moves beyond that limit the trade simply fails, which protects you from a much worse fill.
Staking is the practice of locking cryptocurrency to help secure a Proof of Stake network or to participate in a DeFi protocol, in return for a reward. Yields typically range from around 3 to 10 per cent a year. In the UK, HMRC generally treats staking rewards as miscellaneous income, taxable at their sterling value when received, with a separate Capital Gains Tax position when the rewards are later sold.
Volume is the amount of a cryptocurrency traded over a given period, most commonly the trailing 24 hours. High volume signals a liquid market with tight spreads, while low volume means even modest orders can move the price and cause slippage. Reported exchange volume is not always reliable, and on smaller venues it can be inflated by wash trading between connected accounts.
A whale is an individual or entity holding enough of a cryptocurrency to move the market on its own. On Bitcoin, a wallet with 1,000 BTC or more is generally considered a whale. On-chain analysts watch whale wallets for signals about likely buying or selling pressure. Whale movements alone are not a reliable trading signal, but unusually large transfers to or from exchanges are often used as one input among many.
Yield farming is a strategy of moving cryptocurrency between DeFi protocols to maximise returns. It typically combines liquidity provision, lending and staking, sometimes layered on top of each other. Headline yields can be very high but are offset by smart-contract risk, impermanent loss and the risk of rug pulls in newer projects. Each step is also a potential UK tax event, which makes accurate record-keeping essential.
CoinLedger is a US-headquartered crypto tax tool with strong integrations into TurboTax and other consumer tax software. It supports UK reports, but historically the US-first focus means UK investors may need to review the share-pooling output more carefully than with UK-focused tools. It tends to suit straightforward portfolios and users who want a clean, guided workflow over deep DeFi coverage.
Coinpanda is a crypto tax tool that supports more than 1,000 exchanges and wallets and produces UK-specific reports for Self Assessment and SA108. It applies share-pooling, the same-day rule and the 30-day rule automatically and handles mining, staking and airdrop income. It is a competitive option for UK investors with mainstream portfolios who want a clear walkthrough from imported transactions to filed numbers.
Koinly is an international crypto tax tool with over 800 exchange and wallet integrations and strong support for DeFi activity. It produces UK-ready reports, including data formatted for Self Assessment and the SA108 Capital Gains Summary, and applies share-pooling and the 30-day rule automatically. It is generally a strong choice for portfolios with significant DeFi, staking or NFT activity where manual tracking would be impractical.
AML, anti-money laundering, refers to the rules that require cryptoasset firms to monitor transactions and report anything suspicious to the authorities. In the UK, suspicious activity reports go to the National Crime Agency. AML obligations also include record-keeping, customer risk assessment and ongoing monitoring, and they directly affect which transactions can pass through an exchange without triggering additional checks or document requests.
CARF, the Crypto-Asset Reporting Framework, is the OECD standard for the automatic exchange of information on crypto-asset transactions between tax authorities. The UK has committed to implementing CARF, with reporting by cryptoasset service providers from 2026 and first information exchanges in 2027. In practice, HMRC will receive structured data on UK residents' activity from both UK and overseas platforms, making non-disclosure substantially more likely to be detected.
KYC, Know Your Customer, is the legally required identification of customers that crypto exchanges must carry out before opening an account. It typically involves a passport or driving licence and proof of address. In the UK, KYC for cryptoasset businesses is enforced by the FCA under the Money Laundering Regulations, and registration with the FCA is required before a firm can offer regulated cryptoasset services to UK customers.
MiCA, the Markets in Crypto-Assets Regulation, is the EU framework that became fully applicable in December 2024 and sets harmonised rules for issuers and service providers of crypto-assets. It introduces requirements on transparency, capital, governance and consumer protection, and bans market abuse such as pump-and-dump schemes for in-scope assets. The UK is developing its own parallel cryptoasset regime under FCA supervision rather than adopting MiCA directly.
The Travel Rule is an international standard, originating with the FATF, that requires crypto firms to share sender and beneficiary information for transfers above a defined threshold. In the UK it has applied to cryptoasset businesses since September 2023. The exchange you send from must pass identifying information about you to the receiving exchange, and missing or inconsistent data is a common reason for transfers being held or returned.
