DeFi glossary for Canadians

ACB (adjusted cost base)

The tax cost of your crypto-assets, usually what you paid plus acquisition costs. For identical units, CRA uses the average cost, recalculated on each purchase and unchanged by sales (CRA page modified 2026-02-05). More: Adjusted cost base for crypto: the average-cost method

Address

A public string that identifies a wallet or smart contract on a blockchain, used to send and receive tokens. Sharing your address is safe; sharing your private key or seed phrase is not. More: Crypto wallets explained: keys, addresses and how to choose

Airdrop

Tokens sent to wallet addresses for free, often to reward past use of a protocol or to spread a new token. As of 2026-10-30, CRA has not addressed how airdrops are taxed. Unexpected airdrops can also be bait for scams. More: DeFi transactions and Canadian tax: the open questions

Algorithmic stablecoin

A stablecoin that tries to hold its peg through code and incentives rather than full reserves. The TerraUSD (UST) algorithmic stablecoin lost its peg in May 2022. More: Stablecoin designs compared

AMM (automated market maker)

A smart contract that prices trades using a formula and pooled tokens instead of an order book. Most decentralized exchanges work this way. More: DEXs and liquidity pools: how decentralized trading works

APR (annual percentage rate)

A yearly rate of return or cost that does not include compounding. In DeFi, advertised APRs can change by the hour. More: APY reality check

APY (annual percentage yield)

A yearly rate that includes the effect of compounding, so it is higher than the matching APR. A displayed APY is an estimate based on current conditions, not a promise. More: APY reality check

Block explorer

A website that lets anyone look up addresses, transactions and blocks on a public blockchain. It shows what happened on-chain, but not the Canadian-dollar values you need for tax. More: Crypto record keeping for Canadian taxes

Blockchain

A shared ledger kept by many computers, where transactions are grouped into linked blocks. CRA describes crypto-assets as relying on cryptographically secured distributed ledgers. More: What is DeFi? A plain-language guide for Canadians

Bridge

A system that moves tokens between blockchains, usually by locking or burning them on one network and issuing a representation on another. Because bridges hold pooled value, a flaw in one can affect every token that relies on it. More: Blockchain bridges explained: how assets move between networks

Business income

Profit from carrying on a business, which is fully included in income. CRA decides case by case whether crypto gains are business income or capital gains (page modified 2025-12-02). More: Capital gains or business income: how CRA decides for crypto

CAFC (Canadian Anti-Fraud Centre)

The federal centre where Canadians report fraud and cybercrime, including crypto investment scams. More: Lost crypto to a scam? What to do and who to tell in Canada

Capital gain

The profit when you dispose of capital property for more than its adjusted cost base and selling costs. One-half of a capital gain is included in income; a proposed increase to that rate was cancelled on 2025-03-21. More: Capital gains or business income: how CRA decides for crypto

Capital loss

The loss when you dispose of capital property for less than its adjusted cost base and selling costs. CRA says allowable capital losses only offset taxable capital gains, and net capital losses can be carried back three years or forward indefinitely. More: Capital gains or business income: how CRA decides for crypto

CARF (Crypto-Asset Reporting Framework)

An international standard under which crypto-asset service providers report user information to tax authorities. In Canada it is proposed, with a deferred application date of 2027-01-01; Bill C-31 had not passed as of 2026-10-30. More: CARF in Canada: proposed crypto platform reporting to the CRA

CDIC (Canada Deposit Insurance Corporation)

The federal agency that insures eligible deposits at member institutions up to $100,000 per category. CDIC says cryptocurrencies, including stablecoins, are not covered (checked 2026-10-30). More: CDIC and crypto: what deposit insurance does and doesn’t cover

Centralized exchange (CEX)

A company-run platform that holds customer funds and matches buy and sell orders. Platforms serving Canadians must register with securities regulators. More: Centralized vs decentralized exchanges

CIRO (Canadian Investment Regulatory Organization)

The self-regulatory organization that oversees investment dealers in Canada. In a 2024-08-06 release, the CSA and CIRO said they expect crypto trading platforms to register as investment dealers and become CIRO members. More: How crypto trading platforms are regulated in Canada

Cold wallet

A wallet whose keys are kept offline, such as on a hardware device or paper, to reduce exposure to online attacks. Cold storage trades convenience for security. More: Crypto wallets explained: keys, addresses and how to choose

Collateral

Assets you lock up to secure a loan. In DeFi lending, if your collateral’s value falls too far relative to your debt, it can be liquidated automatically. More: DeFi lending protocols: collateral, health factor and liquidation explained

Consensus mechanism

The method a blockchain’s participants use to agree on which transactions are valid and in what order. Proof of work and proof of stake are the two best-known types. More: Staking explained: proof of stake, validators and your options

Crypto asset trading platform (CTP)

The term Canadian securities regulators use for a platform that lets clients buy, sell or hold crypto assets. CTPs serving Canadians, including foreign ones, must register. More: How crypto trading platforms are regulated in Canada

Crypto-asset

CRA’s term for digital representations of value that rely on cryptographically secured distributed ledgers. It covers coins, stablecoins and most DeFi tokens. More: What counts as a crypto disposition in Canada

CSA (Canadian Securities Administrators)

The umbrella group of Canada’s provincial and territorial securities regulators. The CSA publishes the list of crypto platforms authorized to do business with Canadians (last updated 2026-09-18 when checked). More: How to check a crypto platform in Canada

Custodial

An arrangement where a company holds the private keys to your crypto-assets for you. It is convenient, but you rely on that company’s solvency, security and honesty. More: Custodial platform vs self-custody

DAO (decentralized autonomous organization)

A group that coordinates and makes decisions through smart contracts and token-holder votes. How decentralized a DAO really is varies widely. More: DAOs explained: governance tokens, voting and treasury risk

dApp (decentralized application)

An application whose core logic runs in smart contracts on a blockchain, usually reached through a website front end. The front end can be changed or spoofed even if the contracts cannot. More: What is DeFi? A plain-language guide for Canadians

De-peg

When a stablecoin trades meaningfully away from the value it is meant to track. De-pegs can be brief or permanent. More: Stablecoin depeg risk: when one dollar stops being one dollar

DeFi (decentralized finance)

Financial services such as trading, lending and borrowing built from smart contracts on public blockchains, without a traditional intermediary holding your funds. More: What is DeFi? A plain-language guide for Canadians

Delegation

Assigning your tokens’ staking weight to a validator without handing over the tokens themselves. Rewards and penalties depend on how that validator performs. More: Ways to stake, compared

DEX (decentralized exchange)

An exchange run by smart contracts where you trade directly from your own wallet. No company holds your funds, but contract and pricing risks remain. More: DEXs and liquidity pools: how decentralized trading works

Disposition

In tax, the event that triggers a gain or loss. CRA lists selling, trading crypto for crypto, paying for goods or services, gifting or donating, and gambling with crypto-assets as dispositions. More: What counts as a crypto disposition in Canada

Eligible crypto investor

A category used in individual Canadian platform decisions to set higher purchase limits, based on thresholds for net assets or income. For example, one OSC platform decision dated 2026-03-25 sets it at net assets over $400,000 or net income over $75,000 ($125,000 with a spouse) in each of the last two years. More: How crypto trading platforms are regulated in Canada

Exploit

An attack that takes advantage of a flaw in a smart contract, bridge or oracle to drain or lock funds. Exploits are often irreversible because blockchain transactions cannot be undone. More: Smart contract risk: when the code itself fails

Fiat-backed stablecoin

A stablecoin backed by reserves of government currency and similar assets held by an issuer. Canada’s Stablecoin Act, which will regulate such issuers, was enacted but not in force as of 2026-10-30. More: Stablecoins explained: how pegs hold, how they break, and where Canada stands

FINTRAC

Canada’s financial intelligence agency. FINTRAC treats dealing in virtual currency as a money services business activity, and such businesses must register with it. More: How crypto trading platforms are regulated in Canada

Flash loan

An uncollateralized loan that must be borrowed and repaid within a single transaction, or the whole transaction is reversed. Flash loans have legitimate uses but have also funded oracle manipulation attacks. More: Oracle manipulation: when the price a contract sees is wrong

Fork

A change to a blockchain’s rules, or a copy of a project’s code launched separately. A chain split can leave holders with units on two networks. More: Blockchain security: consensus, finality and what really gets hacked

Front-running

Placing a transaction ahead of someone else’s known pending transaction to profit from the price move it will cause. It is one form of MEV. More: Crypto exchanges, DEXs and aggregators: how trading works in Canada

Gas

The fee you pay to have a transaction processed on a blockchain such as Ethereum. Gas costs rise when the network is busy and are paid even if a transaction fails. More: Gas fees explained: what you pay and why

Governance token

A token that gives holders voting power over a protocol’s rules, treasury or upgrades. Voting power is often concentrated among a few large holders. More: DAOs explained: governance tokens, voting and treasury risk

Hardware wallet

A small physical device that stores your private keys offline and signs transactions without exposing them to your computer. You still need to protect its seed phrase. More: Wallet type chooser

Health factor

A number lending protocols use to show how safe a loan is, comparing the value of your collateral to your debt. When it falls below a set level, usually 1, your position can be liquidated. More: /infographics/health-factor

Hot wallet

A wallet whose keys are on a device connected to the internet, such as a browser extension or phone app. Convenient for daily use but more exposed to malware and phishing. More: Crypto wallets explained: keys, addresses and how to choose

Identical property

Property that is the same in every material respect, such as units of the same crypto-asset. Identical properties share one average cost, and the idea is central to the superficial loss rule. More: Adjusted cost base for crypto: the average-cost method

Impermanent loss

The shortfall a liquidity provider can face compared with simply holding the two tokens, caused by the pool rebalancing as prices move. It becomes permanent if you withdraw while prices are apart. More: Impermanent loss explained: the formula, a table and fees

Inclusion rate

The share of a capital gain that is added to taxable income. In Canada it is one-half; the proposed increase was cancelled on 2025-03-21. More: Capital gains or business income: how CRA decides for crypto

Investment limit

A cap on how much some retail clients can buy on a platform over 12 months, set in each platform’s regulatory decision rather than a general rule. In one OSC platform decision dated 2026-03-25, it is $30,000 net for most clients on non-specified assets and does not apply in AB, BC, MB, QC or SK. More: How crypto trading platforms are regulated in Canada

Layer 1

A base blockchain that settles its own transactions and secures itself, such as Bitcoin or Ethereum. More: Layer 2 networks and sidechains explained

Layer 2

A network built on top of a layer 1 to make transactions faster and cheaper, while relying on the base chain for some or all of its security. Rollups are the most common type. More: Layer 2 networks and sidechains explained

Leverage

Using borrowed funds to increase the size of a position. Leverage magnifies both gains and losses and raises the risk of liquidation. More: Liquidation risk: how DeFi loans get closed for you

Liquid staking

Staking through a protocol that gives you a receipt token representing your staked position, which you can trade or use elsewhere. It adds smart contract and de-peg risk; CRA has not addressed its tax treatment as of 2026-10-30. More: Staking explained: proof of stake, validators and your options

Liquidation

The forced sale of a borrower’s collateral when its value falls too far relative to the debt. Liquidations usually include a penalty and happen automatically. More: Liquidation risk: how DeFi loans get closed for you

Liquidation threshold

The collateral-to-debt level at which a lending protocol allows your position to be liquidated. Each asset can have its own threshold. More: Liquidation explorer

Liquidity mining

Earning extra reward tokens for supplying liquidity to a protocol. Rewards often shrink over time, and their value can fall quickly. More: Liquidity mining: reward tokens, dilution and mercenary liquidity

Liquidity pool

A smart contract holding two or more tokens that traders swap against. People who deposit tokens earn a share of trading fees and take on price and contract risk. More: DEXs and liquidity pools: how decentralized trading works

LP token

A token you receive when you add liquidity to a pool, representing your share of it. You return it to withdraw. As of 2026-10-30, CRA has not addressed whether receiving one is a disposition. More: DEXs and liquidity pools: how decentralized trading works

MEV (maximal extractable value)

Profit that block producers or bots can capture by reordering, inserting or excluding transactions. For users it often shows up as worse prices on swaps. More: Crypto exchanges, DEXs and aggregators: how trading works in Canada

Mining

Using computing power to validate transactions on a proof-of-work blockchain in exchange for new coins and fees. CRA says mining will, in most cases, be considered carrying on a business (page modified 2025-11-10). More: Staking, mining and crypto rewards: what CRA has and hasn’t said

MSB (money services business)

A business category regulated by FINTRAC that includes dealing in virtual currency. MSBs must register with FINTRAC and meet anti-money-laundering duties. More: How crypto trading platforms are regulated in Canada

Multisig

A wallet or contract that needs signatures from several keys, such as 2 of 3, to move funds. It reduces single-key risk but adds coordination. More: Crypto wallets explained: keys, addresses and how to choose

NFT (non-fungible token)

A token that is unique rather than interchangeable, often representing a digital item or a claim to one. Owning an NFT does not automatically give you copyright in the item. More: NFTs and tokenized assets: what you actually own

Nonce

A number used once. In account-based blockchains, it counts the transactions sent from an address so each one is processed in order and only once. More: Wallet approvals and signing: what you are really saying yes to

Off-chain

Data or activity that happens outside a blockchain, such as prices on traditional markets or records kept by a company. Getting off-chain data on-chain requires an oracle. More: Oracles and real-world data in DeFi

On-chain

Activity recorded directly on a blockchain, visible to anyone with a block explorer. More: What is DeFi? A plain-language guide for Canadians

Oracle

A service that delivers off-chain data, such as asset prices, to smart contracts. If an oracle reports a wrong price, contracts that rely on it can act wrongly. More: Oracles and real-world data in DeFi

Oracle manipulation

An attack that distorts the price an oracle reports, often by moving a thinly traded market, to borrow too much or trigger unfair liquidations. More: Oracle manipulation: when the price a contract sees is wrong

Overcollateralized

A loan secured by collateral worth more than the amount borrowed. Most DeFi lending works this way to protect lenders from price swings. More: DeFi lending protocols: collateral, health factor and liquidation explained

Peg

The value a stablecoin or wrapped token is designed to track, such as one US dollar or one unit of another token. More: Stablecoins explained: how pegs hold, how they break, and where Canada stands

Phishing

Tricking you into revealing your seed phrase or signing a harmful transaction, usually through fake websites, messages or support agents. More: Crypto and DeFi scams in Canada: spot them, check platforms, report

Private key

The secret number that controls a crypto address. Anyone who has it can move the funds, and losing it without a backup means losing access. More: Key loss risk: losing access to your own crypto

Proof of stake

A consensus mechanism where validators lock up tokens as a stake and can be penalized for misbehaving. More: Staking explained: proof of stake, validators and your options

Proof of work

A consensus mechanism where miners compete to solve computing puzzles to add blocks. Bitcoin uses proof of work. More: Bitcoin (BTC): what it is and how it shows up in DeFi

PRU (pre-registration undertaking)

A commitment a crypto platform signs with Canadian securities regulators so it can keep operating while its registration application is reviewed. More: How crypto trading platforms are regulated in Canada

Qualified custodian

A custodian that meets securities regulators’ standards for holding client assets. Canadian platform terms require client crypto assets to be held with qualified custodians. More: How crypto trading platforms are regulated in Canada

Receipt token

A token a protocol gives you to represent a deposit, such as a supplied loan or staked position. You return it to get your assets back, so losing it can mean losing the deposit. More: DeFi lending protocols: collateral, health factor and liquidation explained

Restricted dealer

A time-limited registration category that Canadian regulators used for crypto platforms during an interim period. In a 2024-08-06 release, CSA members said they do not intend to continue that approach. More: How crypto trading platforms are regulated in Canada

Rollup

A layer 2 that bundles many transactions off the main chain and posts compressed data or proofs back to it. More: Layer 2 networks and sidechains explained

Rug pull

A scam where a project’s creators drain the funds or liquidity they control and disappear, leaving token holders with worthless assets. More: Rug pulls and scams: the risks designed to fool you

Seed phrase

A list of usually 12 or 24 words that can restore every key in a wallet. Anyone who sees it can take your funds, so never type it into a website or share it. More: Seed phrase security: back up, test and pass on your recovery phrase

Self-custody

Holding your own private keys so no company controls your crypto-assets. You gain control and take on full responsibility for security and backups. More: Self-custody readiness check

Slashing

A penalty that destroys part of a validator’s stake for misbehaviour, such as signing conflicting blocks. Delegators can share in the loss. More: Staking explained: proof of stake, validators and your options

Slippage

The difference between the price you expect on a swap and the price you actually get. It grows with trade size and thin liquidity. More: /infographics/dex-swap

Smart contract

A program stored on a blockchain that runs exactly as written when called. Bugs in it can be costly because transactions usually cannot be reversed. More: Smart contracts basics: what they are and how to check one

Smart contract audit

A review of contract code by security specialists to find flaws. An audit lowers risk but does not prove a contract is safe. More: Smart contract risk: when the code itself fails

Specified crypto asset

In Canadian platform decisions, a listed crypto asset that is excluded from the retail investment limit. One OSC platform decision dated 2026-03-25 lists Bitcoin, Ether and Solana among its specified assets. More: How crypto trading platforms are regulated in Canada

Stablecoin

A token designed to hold a steady value, usually one unit of a government currency. Designs include fiat-backed, crypto-backed and algorithmic, and none is covered by CDIC. More: Stablecoins explained: how pegs hold, how they break, and where Canada stands

Stablecoin Act

Canada’s federal law for fiat-backed stablecoin issuers, with the Bank of Canada supervising issuers. It received Royal Assent on 2026-03-26 but was not in force as of 2026-10-30. More: Canada’s Stablecoin Act: what’s enacted, what’s not in force yet

Staking

Locking tokens to help secure a proof-of-stake network in exchange for rewards. CRA says staking rewards on a centralized platform are generally income when credited (page modified 2025-11-10). More: Staking explained: proof of stake, validators and your options

Superficial loss

A capital loss that is denied because you or an affiliated person bought identical property within 30 days before or after the sale and still held it 30 days after. The denied loss is usually added to the new property’s adjusted cost base. More: The superficial loss rule and crypto

Swap

Exchanging one token for another, often through a decentralized exchange. CRA treats trading one crypto-asset for another as a disposition. More: /infographics/dex-swap

Token

A unit of value or a right recorded by a smart contract on a blockchain. Tokens can represent currencies, votes, receipts, items and more. More: Tokenomics: how to read a token’s supply, unlocks and rights

Token approval

Permission you give a smart contract to move a set amount of a token from your wallet. Unlimited or forgotten approvals are a common way funds get drained, so review and revoke them. More: Wallet approvals and signing: what you are really saying yes to

Tokenomics

The design of a token’s supply, distribution, release schedule and uses. It helps explain who benefits as the token is issued and traded. More: Tokenomics: how to read a token’s supply, unlocks and rights

Transaction ID (hash)

The unique identifier of a blockchain transaction, which you can look up in a block explorer. Saving it is the simplest way to prove an on-chain action for your records. More: Crypto record keeping for Canadian taxes

Travel rule

A requirement that reporting entities send originator and beneficiary information with transfers. In Canada, it has applied to virtual currency transfers since 2021-06-01. More: How crypto trading platforms are regulated in Canada

TVL (total value locked)

The total value of tokens deposited in a protocol’s contracts. It shows size, not safety, and can swing with token prices. More: Protocol risk scorecard

Unbonding period

The waiting time after you ask to unstake before your tokens become available. You usually earn no rewards and cannot sell during it. More: Ways to stake, compared

Validator

A participant in a proof-of-stake network that proposes and checks blocks using staked tokens. Poor performance or misbehaviour can lead to missed rewards or slashing. More: Staking explained: proof of stake, validators and your options

Vesting

A schedule that releases tokens to founders, investors or staff over time. Large scheduled releases can add selling pressure. More: Tokenomics: how to read a token’s supply, unlocks and rights

Voluntary Disclosures Program (VDP)

A CRA program that offers case-by-case relief to taxpayers who come forward to correct past errors or omissions (page modified 2026-06-15). More: Crypto record keeping for Canadian taxes

VRCA (value-referenced crypto asset)

The term Canadian securities regulators use for stablecoins traded on platforms. After December 31, 2024, platforms may offer only VRCAs that meet the terms of their regulatory decisions. More: Stablecoin designs compared

Wallet

Software or hardware that holds your keys and lets you sign transactions. The tokens themselves live on the blockchain, not in the wallet. More: Crypto wallets explained: keys, addresses and how to choose

Wallet drainer

Malicious code, usually behind a fake site, that tricks you into signing approvals or transfers that empty your wallet. More: Crypto and DeFi scams in Canada: spot them, check platforms, report

Wrapped token

A token that represents another asset one for one, often so it can be used on a different network or in a specific contract. It depends on the custodian or contract holding the original. More: Blockchain bridges explained: how assets move between networks

Yield

The return earned on an asset over time, from interest, fees or rewards. Higher yields usually come with higher or hidden risks. More: Where DeFi yield comes from (and why advertised rates mislead)

Yield farming

Moving tokens between DeFi protocols to collect interest, fees and reward tokens. It stacks several risks and can create many taxable events. More: Yield farming 101: where DeFi yield comes from and how to test it

Zero-knowledge proof

A cryptographic method for proving something is true without revealing the underlying data. Some rollups use these proofs to show their batches are valid. More: Layer 2 networks and sidechains explained

Education only. Nothing on this page is financial, investment, tax or legal advice, or a recommendation to buy, sell, stake, lend or borrow any crypto-asset. Crypto-assets can lose some or all of their value and are not covered by CDIC. Canadian rules change: check the dated sources above and talk to a qualified professional about your situation. Full disclaimer.