100+ cryptocurrency and hardware wallet terms defined in plain English. Learn the words and phrases used in the world of blockchain and cryptocurrency right here.
A
Access Pin:
A personal identification number used to gain access to a hardware wallet, similar to a PIN used for debit or credit cards.
Airdrop:
A distribution of a cryptocurrency token or coin, usually for free, to numerous wallet addresses.
Air-gapped:
This term refers to a hardware wallet that is not connected to the internet, making it very hard for hackers to access it.
Altcoin:
Any cryptocurrency other than Bitcoin. Examples include Ethereum, Solana, Cardano, Polkadot etc.
B
BIP32, BIP39 and BIP44:
These are “Bitcoin Improvement Proposals” which provide a more secure and user-friendly way to manage private keys and seed phrases.
Blockchain:
A digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
Block:
A file containing data from a period of time on the blockchain network, which is permanently recorded in a sequential chain.
C
Cold storage:
This is when you store digital assets on a cold storage wallet or other means, which is not connected to the internet and is used for added protection. Also known as “offline storage”; “self custody”; “paper wallet”.
D
Decentralised Application (dApp):
An application that runs on a decentralised network, avoiding a single point of failure or control.
Dual-chip:
This refers to a hardware wallet that uses two different chips, one for keeping the private key and the other for the public key.
E
EAL5 (Evaluation Assurance Level 5):
An assurance level for IT products as defined by international standard, ensuring a high level of security after a thorough security analysis.
EAL5+ (Evaluation Assurance Level 5+):
An assurance level that refers to a product that has undergone additional security testing and evaluation beyond the standard EAL5 level. It is not an official standard but some manufacturers and certifying bodies use this term to indicate an additional level of security over EAL5.
EAL6 (Evaluation Assurance Level 6):
Higher level of security than EAL5, often used for products in high-security environments like government and military, considered to have a very high level of security as per international standard.
EAL6+ (Evaluation Assurance Level 6+):
Although not defined by the international standard, it is considered an additional level of security over EAL6 and implies the product has been put through rigorous security testing, to provide the highest level of security available.
F
Fiat Currency:
Traditional money like dollars, pounds, or euros, issued by governments, unlike cryptocurrencies which are decentralised.
Firmware:
The software that runs on a hardware wallet, It controls the basic functions of the device and enables additional features such as seedless setup, HD, and multi-sig.
Fingerprint:
A unique identifier that is used to add an extra layer of security to a hardware wallet.
Fork:
In cryptocurrency, a change to the protocol of the blockchain that results in two separate versions, potentially creating a new branch.
G
Gas:
A fee paid to execute a transaction or a contract on the Ethereum network. It's measured in "Gwei", a smaller denomination of Ether.
Genesis Block:
The very first block in a blockchain, used as the foundation of the entire network.
H
Hardware Wallet:
A physical device designed to securely store cryptocurrency private keys offline, reducing the risk of hacks compared to online wallets.
Hash:
A unique string of characters generated by a hash function, commonly used in the cryptocurrency world to encode data in a fixed size.
Hash Rate:
A measure of the computational power per second used when mining. Higher hash rates increase the chances of mining a block.
Hot Wallet:
A wallet that is connected to the internet, offering convenience for transactions but less security compared to cold storage.
I
ICO (Initial Coin Offering):
A type of funding historically used by cryptocurrencies, less common now. Often used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.
Immutable:
A characteristic of blockchain technology, where once data is written, it cannot be altered or deleted, ensuring the integrity of the ledger.
K
KYC (Know Your Customer):
A process used by businesses, particularly in financial services, to verify the identity of their clients to prevent fraud and money laundering.
L
Layer 2:
A secondary framework or protocol that is built on top of an existing blockchain system, designed to solve the scalability issues.
Ledger:
A record-keeping system, in the context of blockchain, it refers to the distributed ledger that records all transactions across a network.
Ledger (Hardware Wallet Brand):
Ledger wallets are some of the most well-known on the market. The Nano S and X, are known for their security features and support for a wide range of cryptocurrencies. They combine secure chips and backup options with user-friendly designs.
Lightning Network:
A second-layer protocol on top of a blockchain, like Bitcoin, designed to enable faster and cheaper transactions.
Liquidity:
The ease with which a cryptocurrency can be bought and sold without affecting its market price.
M
Microcontroller:
A small computer on a single chip that includes a brain for the device, memory, and programmable input/output parts.
Mining:
The process of validating and adding new transactions to a blockchain, often involving solving complex computational puzzles.
Multisignature (multi-sig):
A feature that allows multiple users to sign a transaction using different private keys.
N
NFC (Near Field Communication):
A technology that enables wireless communication between devices over short distances, sometimes used in hardware wallets for connectivity.
Node:
A computer connected to the blockchain network, which participates in validating and relaying transactions.
Nonce:
A number used once in cryptographic communication, often in blockchain technology to prevent replay attacks.
O
OLED display:
A special kind of screen that is used in some hardware wallets to show information like the balance and transaction history.
Open source:
A type of software that can be used, modified and shared by anyone.
Oracles:
Services that provide external data to smart contracts on the blockchain, bridging the gap between on-chain and off-chain worlds.
P
Paper Wallet:
A physical document containing a cryptocurrency address and its private key, often in the form of QR codes, used for crypto cold storage.
Passphrase:
An extra layer of security, in the form of a word or phrase, that is needed to access the seed phrase and the cold wallet.
PIN Code:
A personal number that is needed to access the wallet after plugging it into a computer.
Private key:
A secret code that gives you access to the digital assets stored on a hardware wallet.
Proof of Stake (PoS):
A consensus mechanism for blockchains where validators are chosen based on the number of coins they hold and are willing to "stake" as collateral.
Proof of Work (PoW):
A consensus mechanism where miners solve complex mathematical problems to validate transactions and create new blocks.
Public key:
A code that is used to receive digital assets on a hardware wallet.
Q
QR Code:
A type of matrix barcode that contains information about the item to which it is attached, commonly used in cryptocurrency wallets for easy sharing of addresses.
Quantum Computing:
An emerging technology that, in the context of cryptography and blockchain, poses a potential threat to the security of current cryptographic algorithms.
R
Random Number Generator (RNG):
A device or software that generates random numbers. It's used to create a truly random private key in hardware wallets.
Recovery Seed:
Another term for Seed Phrase, used for recovering access to a crypto wallet.
S
Satoshi:
The smallest unit of Bitcoin, named after the pseudonymous creator of Bitcoin, equal to one hundred millionth of a bitcoin.
Secure Element Chip:
A tamper-resistant hardware component used in cryptocurrency hardware wallets to securely generate and store private keys.
Seed Phrase:
A set of words that can be used to restore access to a cold wallet if the device is lost or stolen (also known as a mnemonic phrase or a recovery phase).
Self-Destruct Mechanism:
A security feature in some hardware wallets that automatically erases sensitive data to prevent unauthorised access.
Shamir Backup:
A sophisticated backup system that allows splitting the seed phrase into multiple secure parts, offering an extra layer of security and control.
Smart Contract:
A self-executing contract with the terms of the agreement directly written into lines of code, stored and executed on a blockchain.
T
Tamper-Evident Packaging:
Packaging for hardware wallets designed to reveal if the product has been opened or tampered with before reaching the end-user.
Tamper-proof:
A term used to describe a device or mechanism that is designed to detect and prevent unauthorised access or tampering. Also known as “tamper-evident”.
Token:
A unit of value issued by a project, representing some asset or utility, that operates on top of a blockchain.
Tor Compatibility:
Indicates that a hardware wallet is compatible with Tor, a network for enabling anonymous communication, enhancing user privacy.
Trezor:
A pioneer in hardware wallets, renowned for creating one of the first ever cold wallets. Trezor offers models like Trezor One and Trezor Model T. These wallets are popular for their strong security, ease of use, and support for numerous cryptocurrencies.
Two-factor Authentication (2FA):
A security feature that requires a second form of identification, such as a fingerprint or a code sent to your phone, in addition to a password to access the wallet.
U
UTXO (Unspent Transaction Output):
In cryptocurrencies like Bitcoin, a piece of data that shows how much cryptocurrency (that hasn't been spent) is at a certain address.
