We thought it would be handy to put together a glossary of key cryptocurrency terms to take some of the confusion out of crypto asset management.
Bitcoin: a virtual currency invented in 2008 by Satoshi Nakamoto. Bitcoin is probably the most well-known cryptocurrency.
Blockchain: a digital record of cryptocurrency transactions. Individual records, known as ‘blocks,’ are linked together in a single list or ‘chain.’
Centralized Exchange (CEX): a type of cryptocurrency exchange where a third-party company handles transactions on behalf of users.
Central Processing Unit (CPU): the primary component of a computer that processes instructions.
Cryptocurrency: often referred to as ‘crypto,’ this is a type of currency which uses digital files as money. Cryptocurrencies are secured by encryption and transactions are verified by a decentralized system rather than by a centralized authority such as a traditional bank. Alongside Bitcoin, other well-known types of cryptocurrency include:
Cryptography: the process of converting ordinary plain text into unintelligible text or code that keeps the content secret from unauthorized observers.
Distributed Key Generation (DKG): a cryptographic process in which multiple parties contribute to the calculation of a private key which is then distributed across multiple networks or devices. It is a form of Multi-party Computation (MPC).
Elliptic Curve Digital Signature Algorithm (ECDSA): a type of algorithm that uses elliptic curve cryptography to create a secure digital signature that can be verified by a third party.
Enclave: a section of an internal computer network that is separate from the rest of the system. See also Trusted Execution Environments (TEEs).
Fiat system: a centralized finance system in which government-issued currency — be it euro, dollar, GBP etc. — is decreed legal tender and can be used for financial transactions such as buying goods and services.
Mining: also known as cryptomining. The process of adding cryptocurrency transactions to the Blockchain.
Multi-party Computation (MPC): also known as privacy-preserving computation. A cryptographic protocol that distributes a computation (an action of mathematical calculation) across multiple parties. No individual party can see the other parties' data.
Multisignature (Multisig): a digital signature scheme which allows a group of users to sign a single document. Multisig is often used to authorize cryptocurrency transactions — multiple keys are required to approve the transaction, rather than a single signature from one key.
Node: a device or data point in a larger network; a computer that connects to a cryptocurrency network.
Peer-to-peer (P2P): the exchange of cryptocurrencies or digital assets via a distributed network as opposed to going through a centralized authority.
Private key: an encrypted alphanumeric code that permits access to your cryptocurrency assets.
Public key: your cryptocurrency address so other users can transfer funds to your account.
Seed phrase: also known as a backup phrase, or recovery phrase. A mnemonic phrase or group of words (usually between 12 and 24 words) that allow you to recover access to your cryptocurrency wallet.
Threshold Signatures Scheme (TSS): a digital signature scheme where any (t) (or more) signers of a group of (n) signers can produce signatures on behalf of the group. The most common format is 3 of 5, meaning that 3 out of the 5 group members must approve a transaction for it to take place.
Trusted Execution Environments (TEEs): a secure area, or enclave, on a device’s main processor that is separated from the main operating system. Any information entering or leaving an enclave is encrypted.
Two-factor authentication (2FA): sometimes referred to as two-step verification or dual-factor authentication. A security system that requires two distinct forms of identification in order to access your account. You will need an additional form of verification alongside a username and password — for example, a pin or code sent to your phone.
Verifiable Secret Sharing (VSS): also known as Shamir Secret Sharing. A cryptography algorithm in which a dealer divides a secret — such as a private key — into multiple pieces and distributes them across multiple parties. A certain number of pieces is required to reconstruct the original secret.
Wallet: a place to store your private key. Wallets can be ‘hot’ or software-based. Or they can be ‘cold’ hardware devices. You can store your assets in a personal wallet, where you take responsibility for the security of your funds. Or you can use a third-party exchange — see Centralized Exchange (CEX).
Last modified 1mo ago
Copy link