What cost basis actually is
Cost basis is, at its simplest, what you paid to acquire an asset — usually the fair market value at the time you received it, often including fees paid to acquire it. When you later dispose of that asset, your gain or loss is calculated as the value you received at disposal minus your cost basis. This sounds straightforward for a single purchase: buy one ETH for a known price, sell it later, subtract. The complexity appears the moment you have more than one acquisition of the same asset at different prices, which is the normal state of affairs for anyone who buys or receives crypto more than once.
When you dispose of only part of your holdings — say you bought ETH three times at three different prices and now sell a fraction of it — you need a method for deciding which 'batch' of ETH you're considered to be selling, because that determines which cost basis applies. Common accounting methods include first-in-first-out (FIFO, treating the oldest units as sold first), last-in-first-out (LIFO), and specific identification (choosing exactly which units you're selling, if your records support it). Different jurisdictions permit different methods, and the one you pick can meaningfully change your reported gain, so this isn't a purely mechanical detail — it's a real decision point with real consequences.