Crypto Fundamentals: The Beginner’s Foundation

A cryptocurrency is a digitally native asset recorded on a blockchain.

Unlike an ordinary entry in a bank’s private database, a cryptocurrency can often be:

• Held directly by its owner
• Transferred without a traditional bank
• Verified through a public network
• Programmed to interact with applications
• Traded globally around the clock

Crypto is not one single thing. The industry includes digital money, programmable networks, stablecoins, financial applications, data infrastructure, tokenized assets, and decentralized marketplaces.

The purpose of this guide is to provide the foundational vocabulary and mental models needed to understand how these systems work, how their assets capture value, and how users interact with them.

Part I: Coins, Tokens, and Networks

Coin

A coin is the native asset of its own blockchain.

Examples include:

• BTC on Bitcoin
• ETH on Ethereum
• XRP on the XRP Ledger
• SOL on Solana
• BNB on BNB Chain
• ADA on Cardano

Native coins commonly pay transaction fees and help secure or operate their networks.

Token

A token is an asset created on top of an existing blockchain.

Examples include:

• Stablecoins
• Governance tokens
• Application tokens
• Tokenized securities
• Liquidity-provider tokens
• NFTs

Every coin is a crypto asset, but not every crypto asset is a native coin.

Native asset

A native asset is the primary asset built directly into a blockchain’s protocol.

It generally has deeper network functionality than an ordinary token, such as paying fees, securing the network, or maintaining blockchain accounts.

Layer 1

A Layer 1, or L1, is a foundational blockchain that performs its own consensus and settlement.

Examples include:

• Bitcoin
• Ethereum
• XRP Ledger
• Solana
• BNB Smart Chain
• Cardano
• Hedera

Layer 2

A Layer 2, or L2, processes activity above another blockchain and ultimately relies upon the underlying network for some combination of settlement, security, or data availability.

Examples include optimistic and zero-knowledge rollups built around Ethereum.

The basic idea is:

Execute more activity elsewhere, then settle summarized results back to the base network.

Sidechain

A sidechain is an independent blockchain connected to another network through bridges or interoperability technology.

Unlike a typical Layer 2, a sidechain usually has its own validator set and security model.

Mainnet

A mainnet is the live production blockchain where transactions involve assets with real economic value.

Testnet

A testnet is an experimental version of a network where developers can test applications using tokens with no intended monetary value.

Fork

A fork occurs when blockchain software or rules diverge.

A soft fork introduces changes that remain compatible with older rules. A hard fork introduces changes that may create an incompatible network unless participants upgrade.

Protocol

A protocol is the collection of rules governing how a blockchain or decentralized application operates.

Open source

Open-source software makes its underlying code available for inspection, modification, and collaborative development.

Open source does not automatically mean decentralized, secure, or free from administrative control, but it allows independent parties to examine the software.

Part II: Understanding Crypto Assets

Utility token

A utility token is used to access or operate a product, application, or network.

Possible utility includes:

• Paying fees
• Purchasing storage
• Accessing services
• Providing collateral
• Voting
• Staking

Governance token

A governance token grants voting power over certain protocol decisions.

Governance rights do not necessarily provide ownership of protocol revenue or equity in the organization developing the protocol.

Stablecoin

A stablecoin is designed to maintain a stable value relative to another asset, usually the U.S. dollar.

Major categories include:

• Cash-and-Treasury-backed stablecoins
• Crypto-collateralized stablecoins
• Tokenized bank deposits
• Algorithmic or synthetic stablecoins

Stablecoins can lose their intended value, an event known as a depeg.

Real-world asset

A real-world asset, or RWA, is an offchain asset represented or administered using blockchain infrastructure.

Examples include:

• Government bonds
• Private credit
• Equities
• Real estate
• Commodities
• Money-market funds
• Bank deposits

Wrapped asset

A wrapped asset is a blockchain representation of an asset that originates elsewhere.

For example, wrapped BTC on another blockchain is intended to represent Bitcoin held or controlled through a separate arrangement.

The reliability of a wrapped asset depends upon its custody, wrapping, or bridging system.

NFT

A non-fungible token, or NFT, represents a unique or individually identifiable item.

NFTs can represent:

• Digital art
• Game items
• Memberships
• Tickets
• Credentials
• Property records
• Financial positions

Fungible asset

A fungible asset consists of interchangeable units.

One unit of an asset is intended to be equivalent to another unit of the same asset, just as one dollar is interchangeable with another dollar.

Privacy coin

A privacy coin is designed to conceal or minimize publicly visible transaction information.

Different privacy networks may obscure senders, recipients, balances, transaction amounts, or combinations of those elements.

Meme coin

A meme coin is an asset whose value is driven primarily by culture, community, attention, or speculation rather than a required infrastructure function.

Some meme coins may develop applications over time, but their original demand usually comes from social participation.

Security token

A security token represents an investment instrument or ownership claim administered through blockchain infrastructure.

It may represent equity, debt, a fund interest, revenue rights, or another regulated financial product.

Payment token

A payment token is designed primarily to transfer or settle value.

Its usefulness depends upon factors such as speed, cost, liquidity, acceptance, finality, and regulatory accessibility.

Bridge asset

A bridge asset serves as an intermediary between two currencies or markets that do not have an efficient direct trading pair.

Instead of maintaining every possible currency pair, participants can route conversions through a commonly liquid bridge asset.

Part III: Tokenomics

Tokenomics describes an asset’s supply, distribution, incentives, utility, and economic design.

It is one of the most important subjects in crypto.

Circulating supply

The circulating supply is the estimated number of coins or tokens presently available to the market.

Total supply

The total supply generally includes all existing tokens minus permanently destroyed tokens, although reporting conventions can vary.

Maximum supply

The maximum supply is the greatest number of tokens that the protocol’s rules are designed to permit.

Some assets have a fixed maximum. Others do not.

Emissions

Emissions are newly created or newly released tokens used for mining rewards, staking rewards, development, incentives, or ecosystem funding.

High emissions may create continuing sell pressure if recipients regularly sell their rewards.

Unlock

A token unlock occurs when previously restricted team, investor, foundation, or ecosystem tokens become transferable.

An unlock does not guarantee selling, but it increases the supply that could enter the market.

Inflation

Token inflation occurs when the available supply expands.

Inflation may serve a productive purpose when it funds security or growth, but holders should understand:

• How quickly supply is expanding
• Who receives the new tokens
• Whether demand is growing quickly enough to absorb them

Burn

A token burn permanently removes tokens from supply.

Burning tokens only produces meaningful scarcity when the amount is substantial relative to issuance and total supply.

Deflationary asset

A deflationary asset has a declining supply over a particular period.

An asset can have a burn mechanism without being net deflationary if new issuance exceeds the amount burned.

Vesting schedule

A vesting schedule determines when restricted team or investor tokens become transferable.

Free float

Free float is the portion of supply realistically available for regular trading.

Circulating-supply figures can overstate free float because some circulating assets may be:

• Staked
• Locked in DeFi
• Held in corporate treasuries
• Controlled by long-term holders
• Permanently lost
• Otherwise unavailable for ordinary trading

Market capitalization

Market capitalization is calculated as:

Token Price × Circulating Supply

A low token price does not automatically make an asset inexpensive. Supply matters.

A $0.10 token with 100 billion units has a larger market capitalization than a $100 token with one million units.

Fully diluted valuation

Fully diluted valuation, or FDV, estimates the project’s value if its maximum or total intended supply were circulating:

Token Price × Maximum Supply

A large difference between market capitalization and FDV can indicate significant future dilution.

Token distribution

Token distribution describes how the supply was allocated among groups such as:

• Founders
• Employees
• Investors
• Foundations
• Treasuries
• Validators
• Miners
• Community members
• Ecosystem programs

A fixed maximum supply does not automatically guarantee broad or fair ownership.

Treasury

A protocol treasury is a pool of assets controlled by a foundation, company, DAO, or governance system.

Treasuries may fund:

• Development
• Grants
• Marketing
• Liquidity
• Acquisitions
• Security
• Ecosystem incentives

Value capture

Value capture asks:

If the network succeeds, why must anyone acquire, hold, stake, lock, spend, or burn this particular token?

A project can have excellent technology while its token captures little of the resulting economic value.

This is one of the most important distinctions in crypto:

Product success and token success are not automatically the same.

Token velocity

Token velocity describes how quickly an asset changes hands.

If users acquire a token only briefly and immediately sell it after using the service, network activity may not create persistent holding demand.

Supply sink

A supply sink is a mechanism that removes assets from liquid circulation.

Examples include:

• Staking
• Collateral deposits
• Long-term escrow
• Liquidity pools
• Treasury holdings
• Permanent burns

Dilution

Dilution occurs when the token supply expands, reducing each existing unit’s percentage share of the total supply.

Price can still rise during dilution if demand grows faster than supply, but dilution increases the amount of demand required.

Part IV: The Blockchain Foundation

Blockchain

A blockchain is a shared database maintained by a network of computers.

Transactions are organized into an ordered history that network participants can independently verify.

Think of it as:

A shared accounting book that many computers possess, verify, and update together.

Distributed ledger

A distributed ledger is a database copied across multiple computers rather than controlled by one central database administrator.

A blockchain is one type of distributed ledger.

Block

A block is a collection of transactions or data added to a blockchain’s history.

Different distributed ledgers may use structures other than traditional blocks, but the general purpose remains the same: recording an agreed-upon sequence of activity.

Node

A node is a computer running blockchain software.

Nodes can:

• Store blockchain data
• Verify transactions
• Relay information
• Enforce network rules
• Help applications communicate with the network

Full node

A full node independently verifies transactions and network rules rather than relying entirely upon another service.

Validator

A validator is a network participant responsible for helping confirm transactions and maintain consensus.

Different blockchains select and reward validators differently.

Miner

A miner uses specialized computing resources to participate in a Proof-of-Work blockchain.

Miners compete to produce valid blocks and may receive newly issued coins and transaction fees.

Consensus

Consensus is the process through which network participants agree upon the valid state of a blockchain.

In plain English:

Consensus is how many computers agree about who owns what.

Proof of Work

Proof of Work uses computing power and energy to secure a blockchain.

Bitcoin is the leading example. Miners compete to produce valid blocks and receive BTC rewards.

Proof of Stake

Proof of Stake uses economically committed assets to help secure a network.

Validators stake tokens that may be penalized—or slashed—if they violate network rules.

Delegation

Delegation allows token holders to assign staking power to a validator without operating the validator infrastructure themselves.

Depending on the network, delegators may share in rewards and slashing exposure.

Finality

Finality means a transaction has become sufficiently confirmed that it cannot reasonably be reversed.

Some networks provide probabilistic finality over time. Others provide a definitive result within seconds.

Block time

Block time is approximately how frequently a network produces a new block or ledger update.

Shorter block times can improve responsiveness, but block time alone does not determine capacity, finality, decentralization, or security.

Throughput

Throughput describes how much activity a network can process, often measured in transactions per second.

Reported maximum throughput and sustained real-world throughput are not always the same.

Decentralization

Decentralization describes how widely control, infrastructure, ownership, development, and decision-making are distributed.

It is not a simple yes-or-no characteristic. A network can be decentralized in one area and concentrated in another.

Immutability

Immutability means finalized blockchain records are extremely difficult to alter retroactively.

Immutability depends upon the network’s consensus, validator distribution, economic security, and governance.

Part V: Wallets and Ownership

Wallet

A crypto wallet is software or hardware used to manage blockchain accounts and authorize transactions.

A wallet does not literally store coins inside the device. The assets remain recorded on the blockchain. The wallet controls the credentials required to use them.

Public address

A public address is similar to an account number.

Other people can use it to send assets to you. Sharing an address does not normally grant control over the account.

Private key

A private key is the secret credential that authorizes transactions.

Anyone possessing the private key can usually control the associated assets.

Public address: where assets can be sent Private key: what proves you can spend them

Seed phrase

A seed phrase, sometimes called a recovery phrase, is a human-readable backup that can recreate a wallet’s private keys.

Common seed phrases contain 12 or 24 words.

The foundational rule is:

Never give a seed phrase or private key to another person, website, support agent, application, or AI assistant.

Legitimate customer support does not need it.

Custodial wallet

With a custodial wallet, another organization controls the private keys for you.

An exchange account is the most common example.

Advantages can include convenience, account recovery, and integrated trading.

The tradeoff is that the custodian ultimately controls access to the assets.

Self-custody

With self-custody, you control your private keys.

This provides direct ownership but also makes you responsible for:

• Backups
• Transaction accuracy
• Device security
• Recovery procedures
• Smart-contract approvals

Hot wallet

A hot wallet is connected to the internet.

It is convenient for regular transactions but has greater exposure to malicious software and phishing.

Cold wallet

A cold wallet keeps private keys offline or inside specialized hardware.

It is normally preferred for assets that do not need to move frequently.

Hardware wallet

A hardware wallet is a physical device designed to generate and protect private keys while signing transactions in a more isolated environment.

The device reduces certain online risks, but users must still verify transaction details and protect their recovery phrases.

Multisignature wallet

A multisignature wallet requires more than one authorized key to approve a transaction.

For example, a two-of-three wallet requires any two of three designated keys.

Institutions use multisignature or multiparty-computation systems to prevent one person from unilaterally moving funds.

MPC

Multiparty computation, or MPC, divides control over signing operations among multiple parties or systems without requiring one complete private key to exist in a single location.

Wallet connection

A wallet connection allows an application to view an address and request signatures.

Connecting a wallet does not automatically transfer assets, but users should carefully examine every requested approval or transaction.

Part VI: Exchanges, Trading, and Liquidity

Centralized exchange

A centralized exchange, or CEX, is operated by a company that maintains customer accounts and executes trades.

Examples include Binance, Coinbase, Kraken, and others.

Decentralized exchange

A decentralized exchange, or DEX, uses blockchain-based contracts or protocol-native functions to facilitate trading.

Users generally trade through their own wallets.

Trading pair

A trading pair identifies the two assets being exchanged, such as BTC/USD or ETH/USDC.

The first asset is normally the base asset, while the second is the quote asset.

Order book

An order book contains offers from buyers and sellers at different prices.

Automated market maker

An automated market maker, or AMM, uses assets deposited into liquidity pools to quote prices algorithmically.

Liquidity

Liquidity describes how easily an asset can be bought or sold without significantly moving its price.

High trading volume does not always mean deep liquidity.

Liquidity pool

A liquidity pool is a collection of assets used to facilitate decentralized trading, lending, or other financial activity.

Liquidity provider

A liquidity provider, or LP, deposits assets into a pool and receives a share of fees or incentives.

Slippage

Slippage is the difference between the expected trade price and the actual execution price.

Slippage tends to increase when:

• Liquidity is shallow
• The trade is large
• Markets are volatile

Spread

The spread is the difference between the highest available buying price and the lowest available selling price.

Market order

A market order executes immediately against available liquidity.

It prioritizes execution over price precision.

Limit order

A limit order executes only at the selected price or better.

Volatility

Volatility measures how sharply an asset’s price moves.

A useful or valuable asset can still be highly volatile.

Trading volume

Trading volume measures the value or quantity of assets traded during a particular period.

Volume can indicate activity, but it does not independently prove adoption, liquidity quality, or organic demand.

Leverage

Leverage allows a trader to control a position larger than the capital committed.

Leverage magnifies gains and losses and can cause forced liquidation.

Long position

A long position benefits when an asset’s price rises.

Short position

A short position benefits when an asset’s price falls.

Open interest

Open interest measures the value or number of derivative contracts that remain open.

It differs from trading volume, which measures how much changed hands during a period.

Part VII: Connectivity and Infrastructure

Bridge

A bridge transfers or represents assets and information across different blockchains.

Bridges are important because independent blockchains do not automatically understand one another.

Interoperability

Interoperability is the ability of different networks, applications, and financial systems to communicate and exchange value.

Oracle

An oracle supplies external information to a blockchain.

Smart contracts may require oracles for:

• Asset prices
• Interest rates
• Weather data
• Sports results
• Reserve verification
• Proof of identity

A blockchain cannot independently know the outside price of an asset without an external data mechanism.

Cross-chain

Cross-chain describes transactions or applications involving more than one blockchain.

Data availability

Data availability means the information required to verify blockchain activity remains accessible to network participants.

API

An application programming interface, or API, allows software systems to communicate.

APIs are especially important in machine finance because autonomous agents interact through software instructions rather than clicking buttons.

Indexing

Indexing organizes blockchain data so applications can search and retrieve it efficiently.

Raw blockchain data may be publicly available while still being difficult for applications to query without an indexing layer.

RPC

A remote procedure call, or RPC, is a method applications and wallets use to communicate with blockchain nodes.

RPC providers often serve as gateways between user-facing applications and blockchain networks.

Cross-chain messaging

Cross-chain messaging allows instructions or data—not merely tokens—to move between networks.

This can enable applications on one blockchain to trigger actions on another.

Account abstraction

Account abstraction gives blockchain accounts programmable behavior.

Possible features include:

• Social recovery
• Spending limits
• Session keys
• Automated payments
• Sponsored fees
• Multi-step transactions
• Institutional approval policies

Paymaster

A paymaster is a system that can pay transaction fees on behalf of a user or allow fees to be paid through an alternative asset.

Machine compatibility

Machine compatibility measures how readily a blockchain or application can be used by autonomous software.

Relevant characteristics include:

• Reliable APIs
• Predictable fees
• Fast finality
• Programmable accounts
• Accessible data
• Composability
• Automated execution
• Machine-readable documentation

Part VIII: DeFi Fundamentals

Decentralized finance

Decentralized finance, or DeFi, refers to financial services executed through blockchain networks and smart contracts.

It includes:

• Trading
• Lending
• Borrowing
• Staking
• Derivatives
• Insurance
• Asset management
• Payments

Collateral

Collateral is an asset pledged to secure a loan or financial obligation.

Loan-to-value ratio

The loan-to-value ratio, or LTV, compares the amount borrowed with the value of the collateral.

If someone deposits $10,000 in collateral and borrows $5,000:

LTV = 50%

Liquidation

A liquidation occurs when collateral is sold because its value no longer sufficiently supports a loan or leveraged position.

Liquidation threshold

A liquidation threshold is the point at which a lending protocol can begin selling collateral.

It is not necessarily the same as the maximum initial LTV.

Overcollateralized loan

An overcollateralized loan requires collateral worth more than the amount borrowed.

Undercollateralized loan

An undercollateralized loan allows borrowing that exceeds the value of pledged collateral.

It requires additional mechanisms such as identity, credit assessment, legal agreements, first-loss protection, or institutional underwriting.

Staking

Staking means committing assets to support a Proof-of-Stake network, usually by validating or delegating.

Not every product labeled “staking” is genuine protocol staking. Some are lending or yield programs using the term loosely.

Liquid staking

Liquid staking provides a tradable token representing a staked position.

This allows the representation to be used elsewhere while the underlying asset remains staked.

Restaking

Restaking uses already-staked assets or staking representations to help secure additional services.

It can increase capital efficiency while introducing additional dependencies and slashing conditions.

Yield

Yield is the return generated from staking, lending, liquidity provision, or another financial activity.

The foundational question is:

Where does the yield come from?

Possible sources include:

• Real transaction fees
• Borrower interest
• Trading fees
• Token emissions
• Subsidies
• Leveraged strategies

APR and APY

APR generally represents a simple annualized rate.

APY includes the effect of compounding.

Impermanent loss

Impermanent loss can occur when assets inside an AMM pool change in price relative to one another.

A liquidity provider may end with less value than if the assets had simply been held separately.

Vault

A vault is a smart-contract system that holds assets and applies a defined strategy or set of rules.

Vaults may automate lending, liquidity provision, collateral management, or yield strategies.

Flash loan

A flash loan is borrowed and repaid within a single blockchain transaction.

If it is not repaid before the transaction ends, the entire transaction is reversed.

Total value locked

Total value locked, or TVL, estimates the value deposited inside a protocol or blockchain ecosystem.

TVL can indicate adoption and available capital, but it does not automatically measure revenue, profitability, security, or token value capture.

Part IX: Smart Contracts and Applications

Smart contract

A smart contract is blockchain-based code that executes according to predefined rules.

It can manage:

• Token transfers
• Loans
• Exchanges
• Escrow
• Governance votes
• Insurance payouts
• Derivatives
• Ownership records

“Smart” does not mean intelligent, and “contract” does not automatically mean legally enforceable.

It simply means programmable blockchain logic.

Decentralized application

A decentralized application, or dApp, uses smart contracts or decentralized infrastructure for part of its operation.

The website itself may still be centrally hosted even when the financial contracts operate onchain.

Permissionless

A permissionless system generally allows anyone to access it without receiving prior approval from a central operator.

Permissioned

A permissioned system restricts participation according to identity, licensing, governance, or compliance requirements.

Public and permissioned systems can also be combined.

Composability

Composability means one application can connect to and build upon another.

A lending application might use:

• A stablecoin issued by one company
• Prices from an oracle network
• Liquidity from a decentralized exchange
• Collateral created by a tokenization platform

This interoperability is sometimes described as money Legos.

Escrow

Escrow holds assets until predefined conditions are satisfied.

Conditions may involve time, signatures, deliveries, prices, or external information supplied by an oracle.

DAO

A decentralized autonomous organization, or DAO, is an organization coordinated through blockchain-based governance, tokens, smart contracts, or community voting.

DAOs differ substantially in how decentralized and legally organized they are.

Upgradeability

An upgradeable contract can have its logic changed after deployment.

Upgradeability allows improvements and repairs, but it also introduces governance and administrator dependencies.

Admin key

An admin key grants privileged control over a protocol or smart contract.

It may allow an administrator to pause activity, upgrade contracts, freeze assets, or change system parameters.

Part X: How Transactions Work

A typical crypto transaction follows this sequence:

1. A wallet creates transaction instructions.
2. The owner signs them with a private key.
3. The transaction is broadcast to the network.
4. Nodes verify that it follows the rules.
5. Validators or miners include it in the ledger.
6. The transaction reaches finality.
7. The blockchain reflects the updated balances or application state.

Transaction hash

A transaction hash is the unique identifier for a blockchain transaction.

It can be entered into a block explorer to examine:

• Sender and recipient
• Assets transferred
• Transaction fee
• Timestamp
• Confirmation status
• Smart-contract interactions

Block explorer

A block explorer is a search engine for blockchain activity.

Examples include Etherscan, BscScan, Solscan, and XRPL explorers.

Gas

Gas measures the computational work required to process a blockchain transaction.

The gas fee normally depends on:

• Transaction complexity
• Network demand
• Available blockspace
• The network’s fee rules

Network fee

A network fee is the amount paid to process a transaction.

Depending on the blockchain, fees may be:

• Paid to validators or miners
• Partially burned
• Split between several parties
• Destroyed completely

Signature

A digital signature proves that the holder of a private key authorized a transaction without exposing the private key itself.

Nonce or sequence number

A nonce or sequence number identifies the proper order of transactions from an account and helps prevent the same transaction from being executed repeatedly.

Confirmation

A confirmation indicates that a transaction has been included in the blockchain.

Some networks require multiple additional blocks before participants treat the transaction as sufficiently final.

Failed transaction

A failed transaction is a transaction that was submitted but could not successfully execute.

Depending on the network, the user may still pay a fee because validators performed computational work.

Smart-contract approval

A token approval grants a smart contract permission to use specified assets from a wallet.

Some approvals are limited to a particular amount. Others permit access to an unlimited quantity.

Approving a contract is not the same as transferring assets immediately, but a malicious or compromised contract may later use that permission.

Swap

A swap exchanges one crypto asset for another, generally through an order book, liquidity pool, or routing system.

Onchain transaction

An onchain transaction is submitted to and recorded by a blockchain network.

Offchain transaction

An offchain transaction occurs outside the underlying blockchain.

For example, trades between users inside a centralized exchange may update the exchange’s private database without producing an individual blockchain transaction.

Part XI: Security Vocabulary

Phishing

Phishing uses fraudulent messages, websites, or applications to steal credentials or convince users to authorize malicious transactions.

Rug pull

A rug pull occurs when project insiders abandon a project, drain liquidity, or otherwise extract value from users.

Honeypot

A honeypot token can be purchased but prevents ordinary holders from selling.

Smart-contract risk

A smart contract may contain:

• Coding errors
• Economic design flaws
• Malicious administrator functions
• Upgrade vulnerabilities
• Oracle dependencies

“Decentralized” does not mean “incapable of failing.”

Counterparty risk

Counterparty risk is the possibility that an exchange, custodian, issuer, borrower, or service provider fails to meet its obligations.

Depeg

A depeg occurs when a stablecoin or wrapped asset significantly separates from the value it is intended to track.

Audit

A smart-contract audit is a security review of code.

An audit reduces uncertainty but does not guarantee safety.

Wallet drain

A wallet drain occurs when malicious software or an approved contract transfers assets from a wallet.

A wallet can be drained without its seed phrase being revealed if the user signs a dangerous transaction or approval.

Exploit

An exploit uses a technical, economic, or logical weakness to manipulate a protocol or access assets improperly.

Oracle manipulation

Oracle manipulation occurs when a protocol receives an inaccurate or distorted external price or data input.

This can lead to improper trades, loans, or liquidations.

Bridge risk

Bridge risk is the possibility that cross-chain infrastructure is compromised, improperly collateralized, or unable to honor represented assets.

Governance attack

A governance attack occurs when an individual or coordinated group obtains enough voting power to pass proposals benefiting itself at the expense of the protocol.

Slashing

Slashing is a penalty that removes some staked assets when a validator violates network rules.

Reentrancy attack

A reentrancy attack occurs when a malicious contract repeatedly calls another contract before the original operation has safely finished updating its internal state.

Sybil attack

A Sybil attack occurs when one participant creates many false identities to gain disproportionate influence over a network.

51% attack

A 51% attack occurs when one party or coordinated group gains majority control over the relevant consensus resource, potentially allowing it to reorganize transactions or censor network activity.

Social engineering

Social engineering manipulates people into revealing information, installing software, or authorizing actions.

The attacker targets human judgment rather than breaking the blockchain itself.

Recovery scam

A recovery scam occurs when someone claims they can recover stolen crypto in exchange for payment or access credentials.

Address poisoning

Address poisoning sends small transactions from lookalike addresses so a victim may later copy the wrong address from transaction history.

Dusting attack

A dusting attack sends tiny quantities of assets to wallets for tracking, advertising, phishing, or other unwanted purposes.

Security foundation

The essential habits are:

• Protect private keys and seed phrases
• Verify addresses before sending
• Use official application links
• Examine wallet requests before signing
• Review token approvals
• Separate long-term holdings from active wallets
• Test unfamiliar transfers with a small amount
• Remember that blockchain transactions are usually irreversible