Glossary
Key terms you'll run into on this site and in crypto exchanges generally, defined plainly.
- ADL
- Auto-deleveraging. A futures exchange can reduce profitable traders' positions when its insurance fund cannot cover bankrupt accounts. It's an unpleasant but real risk on thin venues.
- AML
- Anti-money laundering checks used to detect suspicious deposits, withdrawals, and trading activity. Exchanges may freeze funds or request documents if a transaction triggers their controls.
- API Key
- A credential that lets trading software access an exchange account. Keys can have trading, withdrawal, or read-only permissions, so withdrawal access should usually stay disabled.
- Base Currency
- The first asset in a trading pair. In BTC/USDT, BTC is the base currency and USDT is the quote currency used to price it.
- Cold Wallet
- A wallet kept offline from internet-connected exchange systems. Cold storage reduces hacking exposure, though it can make large withdrawals slower to process.
- Deposit Address
- The blockchain address an exchange assigns for receiving a specific asset. Sending the wrong coin or using an unsupported network can lead to a permanent loss.
- Depth Chart
- A visual view of buy and sell orders at different prices. It helps show available liquidity, though large displayed orders can disappear before a trade fills.
- Fiat On-Ramp
- A service that lets users buy crypto with government-issued money through bank transfer, card payment, or local payment methods. Fees are often higher than advertised.
- Funding Rate
- A periodic payment exchanged between long and short perpetual futures traders. Positive funding means longs pay shorts, usually because long demand is stronger.
- Hot Wallet
- A wallet connected to the internet and used for routine exchange withdrawals. It is convenient, but it carries more security risk than offline cold storage.
- Insurance Fund
- Exchange-held capital intended to cover losses from liquidated futures positions before other traders are affected. A large fund is reassuring, but it is not a guarantee.
- KYC
- Know Your Customer verification. An exchange may require identity documents, a selfie, proof of address, or source-of-funds details before allowing certain account features.
- Liquidation
- The forced closure of a leveraged position after collateral falls below the exchange's maintenance requirement. Liquidation fees can make a bad trade considerably worse.
- Maker Fee
- The trading fee charged when an order adds liquidity to the order book, usually through a limit order that does not fill immediately. Maker fees are often lower than taker fees.
- Mark Price
- A reference price used to calculate unrealized profit, loss, and liquidations on derivatives exchanges. It is designed to resist brief price spikes on one order book.
- Market Maker
- A trader or firm that continuously posts buy and sell orders to improve liquidity. Good market makers tighten spreads, though their incentives are commercial, not charitable.
- Order Book
- A live list of open buy and sell orders for a trading pair. It shows quoted liquidity, not guaranteed liquidity, because orders can be cancelled at any moment.
- Perpetual Futures
- Leveraged derivative contracts with no expiry date. They track spot prices through funding payments and are popular, but they are far riskier than simply buying the asset.
- Proof of Reserves
- A method for showing that an exchange controls certain customer assets, often using wallet addresses and Merkle tree audits. It does not prove the exchange has no hidden liabilities.
- Slippage
- The difference between the expected trade price and the actual fill price. Slippage rises in volatile markets and on pairs with shallow order books.
- Spread
- The gap between the highest current buy price and the lowest current sell price. A narrow spread usually means cheaper trading, while a wide one quietly adds cost.
- Stop-Limit Order
- An order that places a limit order after a chosen stop price is reached. It gives price control, but it may not fill during a fast move.
- Taker Fee
- The fee charged when an order immediately matches existing liquidity, such as a market order. Taker pricing matters a lot for active traders and small frequent orders.
- Travel Rule
- A compliance rule requiring exchanges and other virtual asset providers to share sender and recipient details for qualifying transfers. It can delay withdrawals to some platforms.
- Withdrawal Whitelist
- An account security feature that restricts withdrawals to pre-approved wallet addresses. It adds friction, which is exactly why it is one of the better safeguards available.