Glossary

The A-Z of crypto and blockchain for beginners

Account

Found in Ledger Live, accounts help keep track of your crypto balances and can create addresses which can be shared to receive funds.

Address

A string of characters (usually letters and numbers) that represents a wallet secured by a blockchain. Addresses can be safely shared with anyone to receive crypto funds.

Airdrop

A distribution mechanism that involves sending coins or tokens to wallet addresses in order to promote awareness or distribute supply. Not to be confused with a dust attack.

BEP2

A token issued and secured by Binance Chain. Not to be confused with BEP20.

BEP20

A token issued and secured by Binance Smart Chain. Not to be confused with BEP2.

Binance Chain

A blockchain launched by Binance in 2019 and designed to decentralize Binance’s trading operations. Binance Chain also supports the issuance and transfer of BEP2 tokens.

Binance Smart Chain

A smart-contract blockchain launched by Binance in 2020. Similar to Ethereum but running on proof-of-stake and optimized for fast transaction time. Binance Smart Chain also supports the issuance and transfer of BEP20 tokens.

BIP

Stands for Bitcoin Improvement Proposal, which is a standardized way to propose changes to the Bitcoin protocol.

BIP39

A standardized technique used to convert a seed into a set of 12/18/24 words that you can easily remember.

Bitcoin

The first decentralized cryptocurrency. Bitcoin was launched in 2009 as a peer-to-peer electronic cash system which solved the double-spend problem.

Block

A bundle of crypto transactions recorded on a blockchain.

Block time

The average time it takes for a new block to be finalized on a crypto network. In Bitcoin, it takes about 10 minutes on average for new blocks to be produced.

Blockchain

A data structure optimized for transparency, robustness and decentralization.

Coin

A crypto network’s native cryptocurrency. For example, ETH is the native coin of the Ethereum network and BTC the native coin of the Bitcoin network. Not to be confused with a token.

Cold wallet

A type of crypto wallet which keeps private keys offline. Cold wallets are the most secure form of storing cryptocurrency. Ledger devices belong to the cold wallet category.

Confirmation

A transaction that has been included in a block is considered confirmed. Each subsequent block is another confirmation and improves the transaction’s finality.

Countervalue

The value of a crypto currency expressed in fiat or another cryptocurrency terms.

Dapp

An app that’s able to connect to a crypto network and execute smart contracts.

DeFi

Decentralized Finance (DeFi) is an open source project to rebuild finance on a blockchain infrastructure. Also the opposite of Centralized Finance (CeFi).

Derivation Path

A piece of data similar to an index that tells your Ledger device how to derive a specific key within a tree of keys.

DEX

A decentralized exchange (DEX) is a non-custodial marketplace for crypto assets. DEX users can exchange crypto assets directly from wallet to wallet without the need to deposit the assets with a central third-party.

Digital Signature

A piece of data needed to spend crypto funds stored in an account or address. Unlike a traditional handwritten signature, a digital signature is tied to a private key, not a person.

ERC20 token

A token issued and secured by the Ethereum network. Not to be confused with BEP20.

Ether (ETH)

Ethereum’s native crypto currency. Can be used to pay for gas fees and as a store of value.

Ethereum

A general-purpose smart contract blockchain launched in 2015. Currently the home of the largest DeFi ecosystem in crypto.

Exchange

A place where you can buy and sell crypto currencies. Some exchanges also offer extra services like derivatives trading, staking, custody, etc. Crypto exchanges can be centralized (CEX) or decentralized (DEX). CEX users need to deposit their assets to the exchange before they can trade while DEX can let you trade directly from your Ledger wallet.

Explorer

A visual representation of a blockchain. Useful to track transactions and look up accounts and addresses.

Fiat currency

Government-issued and enforced currency (ie: USD, EUR, RMB, etc.).

Finality

A probabilistic guarantee that a crypto transaction will not be reversed.

Gas

Gas can be thought of as digital fuel that powers some blockchain like Ethereum. Specifically, gas is a unit that measures the number of computational steps required to execute a particular crypto transaction. The more complex the step, the more gas it requires.

Gas limit

The maximum amount of units of gas a user is willing to pay to execute a particular transaction. Setting the gas limit too low will cause certain complex transactions to “run out of gas” and fail.

Gas price

The price a user is ready to pay for 1 unit of gas. Gas price is usually paid in the crypto network’s native cryptocurrency. In Ethereum, for example, gas is always paid in ETH.

Gwei

The smallest unit of the ether (ETH) cryptocurrency. 1 gwei = 0.000000001 ETH.

Halving

An automatic 50% reduction of the block reward that's hard-coded in Bitcoin and Bitcoin-like crypto networks. In Bitcoin the halving happens every 210,000 blocks mined (roughly every 4 years) or until 21,000,000 Bitcoin is mined. The current bitcoin block reward is 6.25 BTC per mined block.

Hard Fork

A change to the rules of a crypto network which is not compatible with the previous rules. A hard fork can result in a network split and the creation of a competing crypto currency.

Hash

The value returned by a hash function, usually a fixed-size string of letters and numbers.

Hash Function

A mathematical one-way function (for example SHA256) that can be used to map data of arbitrary size to fixed-size hashes. The same input will always produce the same hash.

Hierarchical deterministic (HD) wallet

A category of crypto wallet that includes Ledger Nano devices. HD wallets generate a random number called a seed then use the seed to derive a very large amount of private keys organized in a tree. Private keys are used to secure crypto funds and are stored into the device’s secure element.

Hot wallet

A type of cryptocurrency wallet which is connected to the internet. Hot wallets are typically less secure than cold wallets. Not to be confused with cold wallets.

Lightning Network

A scaling solution for Bitcoin which consists of an overlay network built “on top of” and secured by the Bitcoin blockchain. The Lightning Network allows for very fast transfers of value between Lightning-compatible wallets.

Liquidity

A measure of how deep a market is. Liquid markets typically offer better prices and can meet larger buy and sell orders than illiquid markets.

Metamask

A popular crypto wallet app designed specifically to allow users to interact with dapps on networks such as Ethereum, Binance Smart Chain, Avalanche, etc. Can also serve as an alternative to the Ledger Live app.

Migration

Also known as a swap, a migration happens when a cryptocurrency is deployed on a new blockchain or is moved to a new address on the same blockchain. Migrations typically require holders of the old cryptocurrency to swap them for the new cryptocurrency.

Miner

A private for-profit business or individual whose job is to organize and process transactions on a crypto network.

Mining

The action of organizing crypto transactions into a block then solve a hard mathematical puzzle to have the block accepted by the rest of the network. In BitcoinMining requires lots of specialized equipment.

NFT

A way to represent anything unique as a crypto asset on a blockchain network. On Ethereum specifically, NFTs are created and transferred according to a set of rules called the ERC721 standard.

Node

Generally a point of connection within a network that is capable of creating, receiving, or transmitting data. In crypto networks, nodes also store part of or the entirety of a network transaction history.

Nonce

A digital counter that keeps track of the number of transactions executed by a particular crypto account.

Passphrase

An optional security feature available to Ledger users. In practice the passphrase takes the form of the 25th word used to encrypt a recovery phrase in order to enhance its security. Losing the passphrase will incur the loss of the entire recovery phrase.

PIN code

A 4/8-digit number that protects the access to your Ledger device. Typing three wrong PIN code into your device will trigger a reset to factory settings. Not to be confused with a recovery phrase or passphrase.

Privacy

The right to retain and protect your personal information.

Hot wallet

A type of cryptocurrency wallet which is connected to the internet. Hot wallets are typically less secure than cold wallets.

Private key

A fixed-size string of characters that controls spending from a particular crypto address or account. Anyone with the private key to an account or address can sign transactions in order to spend the funds stored there. Not to be confused with public keys.

Proof of stake (POS)

A consensus mechanism where mining is done through staking coins rather than running specialized hardware. Not to be confused with proof of work.

Proof-of-work (POW)

A consensus mechanism where mining is done through running specialized hardware. Not to be confused with proof-of-stake.

Public key

A fixed-size string ofcharacters calculated from a private key which can be used to verify the signatures produced by that private key.

Recovery phrase

Also known as a mnemonic phrase, a recovery phrase is a sequence of 24 words generated by a new Ledger device upon setup. All recovery words are randomly selected from a standardized list called the BIP39 list. Recovery phrases encode for a random number called a seed from which private keys can be calculated. Anyone gaining access to a recovery phrase can gain access to the funds secured by it so it’s important to keep the phrase private and secure.

Satoshi Nakamoto

The anonymous creator(s) of Bitcoin. Satoshi withdrew from the Bitcoin project in 2011.

Secure Element

A secure microchip which can be found in all Ledger devices. The main function of a secure element is to store your seed and private keys securely.

Seed

A random number generated by your Ledger device and encoded into a human-readable recovery phrase. The seed is used to derive a master private key which is then used to derive child private keys which secure your coins. Not to be confused with a recovery phrase.

SegWit

A contentious Bitcoin soft-fork that modified how Bitcoin blocks are built. The upgrade effectively led to slightly bigger blocks and removed a bug that made building the Lightning Network possible.

Sidechain

A crypto network that derives its security from a parent (generally larger) crypto network. For example, the Liquid network is a sidechain of the Bitcoin network.

Smart contract

A piece of code stored on a blockchain that allows for the automatic execution of complex business logic (if x then y) and makes value transfer programmable.

Soft fork

A change to the rules of a crypto network which is compatible with the previous rules. Soft forks are the preferred way to upgrade the Bitcoin protocol. Not to be confused with a hard fork.

Stake (v.)

To lock a certain amount of crypto funds in order to provide a service to a crypto network (liquidity providing, consensus) in exchange for rewards.

Swap

To exchange one cryptocurrency for another. Swapping can be done within the same crypto network or across different networks (atomic swaps).

Token

A cryptocurrency issued “on top of” an existing crypto network. Tokens are secured by the crypto network on top of which they were issued.

Transaction

A digital message that encodes the transfer of value between two crypto accounts.

TRC10 & TRC20 tokens

Tokens issued and secured by the TRON network. Not to be confused with BEP20 or ERC20 tokens.

Txid

A transaction ID (txid) is the hash to a transaction executed on a crypto network. Txids are frequently used to track funds across networks.

UTXO

Stands for Unspent Transaction Output. The UTXO model is an accounting method used by Bitcoin and Bitcoin-like crypto networks. For example, in Bitcoin, every deposit of BTC into your Ledger account creates a unique UTXO represented by a Bitcoin address and a balance. Your total BTC balance is the aggregate of all UTXOs.

XPUB

A piece of data that represents a tree of public keys generated by a Ledger device. xPubs are useful to keep track of transactions in and out of Ledger accounts. Anyone with your xPub can spy on your transactions so it’s important to keep it private.