Glossary

Airdrop

Basic definition: A distribution method in which free tokens or coins are sent to users’ wallets, often used as a promotional tool.

Detailed definition: Airdrops are marketing strategies used by blockchain projects to distribute tokens directly to users, often based on criteria like holding a particular cryptocurrency or participating in a community. They can incentivize user engagement and increase token circulation, though they also come with regulatory and taxation considerations.

Altcoin

Basic definition: Any cryptocurrency other than Bitcoin, such as Ethereum, Solana, or Ripple.

Detailed definition: Altcoins represent alternative blockchain projects that offer modifications or improvements over Bitcoin’s original design. They may implement different consensus mechanisms, smart contract functionalities, or specific use cases, and can vary widely in terms of technology and adoption.

Bitcoin (BTC)

Basic definition: A decentralized digital currency that enables peer-to-peer transactions without the need for a central authority.

Detailed definition: Bitcoin is a decentralized cryptocurrency that operates on a peer-to-peer network, using cryptographic protocols and a distributed ledger (blockchain) to securely record transactions. It eliminates the need for intermediaries such as banks by relying on a consensus mechanism (Proof-of-Work) where miners validate transactions and secure the network.

Blockchain

Basic definition: A distributed ledger technology that records transactions across many computers so that the record cannot be altered retroactively.

Detailed definition: A blockchain is a sequential chain of blocks, each containing a set of transactions and a cryptographic hash of the previous block. This design ensures immutability and resistance to tampering, as altering a single block would require recalculating all subsequent blocks under a network-wide consensus protocol.

Block Explorer

Basic definition: An online tool that allows users to view and search the contents of a blockchain, including transactions and blocks.

Detailed definition: Block explorers are web-based interfaces that enable users to query blockchain data such as transaction histories, block details, wallet balances, and network statistics. They function by interfacing with a full node’s database, providing transparency and data accessibility for both casual users and developers.

Block Reward

Basic definition: The amount of cryptocurrency awarded to a miner for successfully adding a new block to the blockchain.

Detailed definition: The block reward comprises newly minted cryptocurrency and any transaction fees included in the block. It incentivizes miners to contribute computational power to the network, ensuring security and continuity of the blockchain through the Proof of Work mechanism (or alternative consensus in other systems).

CashAddr address format

Basic definition: CashAddr is a type of address format used by Bitcoin Cash (BCH) to improve readability and reduce errors in transactions. It includes a prefix ("bitcoincash:") and uses a different encoding from legacy Bitcoin addresses to help distinguish BCH from Bitcoin (BTC).

Detailed definition: On 14 January 2018, Bitcoin Cash updated their standard address format, while maintaining compatibility with the old address formats. The new address format is called CashAddr. It has the following form (example only):

Starting from firmware 1.6.2 (Trezor Model One) and 2.0.7 (Trezor Model T), Trezor devices only use the new address format. Converting between CashAddr and legacy address formats can be done using third party tools. Due to length constraints, Trezor Suite and Trezor devices display Bitcoin Cash addresses without the bitcoincash: prefix. If needed, please prepend the prefix manually.

Change Address

Basic definition: An extra address your wallet creates to send unused crypto from a transaction back to you.

Detailed definition: A change address is a new address automatically generated by your wallet to receive leftover funds from a transaction. When you spend a UTXO, the entire amount must be used. If the amount you’re sending is less than the UTXO’s total value, the difference (called ) is sent back to you - not to the same sending address, but to a newly generated change address. This practice enhances privacy and is a standard part of how Bitcoin and other UTXO-based networks operate. Trezor wallets generate change addresses securely and display them only when needed for internal wallet bookkeeping.

Cold Storage

Basic definition: The practice of keeping cryptocurrency offline (e.g., on a hardware wallet or paper wallet) to protect it from online attacks.

Detailed definition: Cold storage involves storing private keys in an environment that is completely isolated from internet connectivity. Methods include hardware wallets, paper wallets, and offline computers, all designed to mitigate risks from hacking, malware, and unauthorized access.

Consensus Algorithm

Basic definition: A method used by blockchain networks to agree on a single version of the ledger, ensuring all participants share the same data (e.g., PoW and PoS).

Detailed definition: Consensus algorithms are protocols designed to achieve agreement on the state of a distributed ledger among network participants. They ensure data consistency and security by incentivizing honest behavior and deterring malicious actions, with popular models including Proof of Work, Proof of Stake, and various hybrid approaches.

Cryptocurrency

Basic definition: Digital or virtual currency that uses cryptography for security and operates independently of a central bank.

Detailed definition: Cryptocurrencies leverage cryptographic techniques to secure transactions, control the creation of new units, and verify the transfer of assets. They often use blockchain technology to maintain decentralized, tamper-proof records, with Bitcoin being the first implementation.

Cryptography

Basic definition: The practice of using mathematical techniques to secure information, essential for ensuring the security of cryptocurrency transactions.

Detailed definition: Cryptography involves mathematical algorithms and protocols that secure data through encryption, decryption, and digital signatures. In the context of cryptocurrencies, it ensures the confidentiality, integrity, and authenticity of transactions by employing techniques such as public-key cryptography, hashing, and zero-knowledge proofs.

Custodial Wallet

Basic definition: A type of wallet where a third party holds and manages the private keys on your behalf.

Detailed definition: Custodial wallets are provided by services where users entrust their private keys to a third-party provider, similar to how a bank manages funds. While this offers convenience and ease of recovery, it introduces counterparty risk, as users do not have full control over their funds and must rely on the security practices of the custodian.

Decentralization

Basic definition: The distribution of power away from a central authority, which is a core principle of blockchain technology.

Detailed definition: Decentralization in blockchain refers to the absence of a central governing body; instead, control is distributed across a network of nodes. This structure enhances security, resilience, and transparency by ensuring that no single entity can manipulate or control the entire network.

Decentralized Autonomous Organization (DAO)

Basic definition: An organization governed by smart contracts and community voting, with decisions made collectively rather than by a central leadership.

Detailed definition: DAOs are organizations that operate on blockchain protocols using smart contracts to automate decision-making and governance. Members hold tokens that represent voting power, and proposals are executed programmatically once consensus is reached, reducing the need for centralized management and increasing transparency.

Decentralized Application (dApp)

Basic definition: An application that runs on a decentralized network like a blockchain, offering transparency and resistance to censorship.

Detailed definition: dApps are software applications built on decentralized networks, utilizing smart contracts to operate without a central authority. They are open-source, run autonomously, and interact with blockchain data, ensuring trustless execution and verifiability of operations.

Decentralized Exchange (DEX)

Basic definition: An exchange that operates without a central authority, enabling peer-to-peer trading directly from users’ wallets.

Detailed definition: DEXs use smart contracts to facilitate direct, peer-to-peer trading without intermediaries holding user funds. They typically leverage automated market makers (AMMs) or order books to match trades, offering enhanced privacy and security at the expense of some user interface and liquidity challenges compared to centralized exchanges.

DeFi (Decentralized Finance)

Basic definition: Financial services built on blockchain technology that operate without intermediaries like banks or brokers.

Detailed definition: DeFi encompasses a range of decentralized financial applications that replicate traditional financial services—such as lending, borrowing, and trading—using smart contracts on public blockchains. These platforms aim to provide open, permissionless, and transparent financial systems while reducing reliance on centralized institutions.

Ethereum (ETH)

Basic definition: A popular cryptocurrency platform known for its support of smart contracts and decentralized applications (dApps).

Detailed definition: Ethereum is a blockchain-based platform that extends the capabilities of Bitcoin by supporting Turing-complete smart contracts and decentralized applications. It introduced the concept of a programmable blockchain, enabling a wide array of decentralized services and tokenized assets. Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism on September 15th 2022, throug an upgrade known as "The Merge".

Exchange

Basic definition: A platform where users can buy, sell, or trade cryptocurrencies for other digital assets or fiat currencies.

Detailed definition: Cryptocurrency exchanges operate as online marketplaces where buyers and sellers meet to trade cryptocurrencies. They can be centralized, where a single entity manages the platform and custody of funds, or decentralized (DEXs), where trading occurs directly between users' wallets via smart contracts.

Fiat Currency

Basic definition: Government-issued currency, such as the US Dollar (USD) or Euro (EUR), which is not backed by a physical commodity.

Detailed definition: Fiat currencies are legal tender issued by central governments and are backed solely by the trust in the issuing authority. Unlike cryptocurrencies, fiat currencies are centralized and subject to monetary policy, inflation, and regulatory oversight.

FUD

Basic definition: An acronym for Fear, Uncertainty, and Doubt; refers to negative sentiment that can affect market prices.

Detailed definition: FUD describes the spread of negative or misleading information intended to create fear, uncertainty, and doubt among investors. This phenomenon can lead to panic selling and market instability, despite the underlying fundamentals of the asset remaining unchanged.

Gas

Basic definition: The fee required to perform transactions or execute smart contracts on the Ethereum network.

Detailed definition: On Ethereum, gas represents the computational effort required to execute operations, with each instruction consuming a specific amount of gas. Users pay gas fees in Ether (ETH) to compensate miners for processing transactions, and gas limits are set to prevent network abuse and ensure that complex computations remain cost-prohibitive.

Halving

Basic definition: A periodic event in the Bitcoin network where the block reward given to miners is reduced by half, affecting the rate of new bitcoin creation.

Detailed definition: Bitcoin halving is programmed into the protocol to occur approximately every 210,000 blocks (roughly every four years), reducing the mining reward by 50%. This deflationary mechanism slows the issuance rate of new bitcoins, contributes to scarcity, and can impact the cryptocurrency's market dynamics.

Hard Fork

Basic definition: A permanent divergence in the blockchain protocol that results in two separate chains, often due to significant changes in rules.

Detailed definition: A hard fork occurs when a blockchain undergoes a protocol update that is not backward-compatible, leading nodes that adopt the new rules to reject transactions from nodes running the old version. This split results in two distinct chains and requires community consensus to determine which chain is maintained.

Hash

Basic definition: The output of a hash function—a fixed-length string generated from input data—that is used to secure and verify data integrity.

Detailed definition: A hash is produced by applying a cryptographic hash function (such as SHA-256) to input data. It creates a fixed-length string that is highly sensitive to input changes, ensuring that even a slight alteration in data produces a significantly different hash. Hashes are fundamental for ensuring data integrity, linking blocks, and securing digital signatures in blockchain systems.

HODL

Basic definition: A term derived from a misspelling of “hold,” used in the crypto community to indicate holding onto cryptocurrency rather than selling.

Detailed definition: Originating from an internet meme, "HODL" has become a rallying cry for long-term investors in cryptocurrency. It implies resisting the urge to sell during market fluctuations, based on the belief that the asset’s value will appreciate over time.

Hot Wallet

Basic definition: An online wallet connected to the internet, offering greater convenience for transactions but with increased security risks.

Detailed definition: Hot wallets are software-based wallets that are connected to the internet, providing immediate access to funds and facilitating frequent transactions. However, their online nature makes them more vulnerable to cyber threats, necessitating additional security measures like two-factor authentication and regular software updates.

ICO (Initial Coin Offering)

Basic definition: A fundraising method in which new cryptocurrency tokens are sold to early investors, similar to an initial public offering (IPO) in the stock market.

Detailed definition: An ICO involves the sale of a new cryptocurrency token to investors, typically in exchange for Bitcoin, Ethereum, or fiat currency. This method allows projects to raise capital, though it is less regulated than traditional IPOs, leading to potential risks such as fraud or lack of investor protection.

Layer 2

Basic definition: Secondary protocols built on top of a base blockchain (Layer 1) to improve scalability, speed, or efficiency (e.g., Lightning Network for Bitcoin).

Detailed definition: Layer 2 solutions operate on top of the base blockchain, handling transactions off-chain while periodically settling on-chain. These protocols, such as the Lightning Network for Bitcoin or various rollups on Ethereum, aim to significantly reduce transaction costs and improve throughput while maintaining the security of the underlying network.

Ledger

Basic definition: A record-keeping system where all blockchain transactions are stored and verified across the network.

Detailed definition: In blockchain terminology, the ledger refers to the distributed database that holds a chronological record of all transactions. Its decentralized nature ensures that no single point of failure exists, and cryptographic techniques are employed to secure the integrity of the data.

Liquidity

Basic definition: A measure of how easily an asset can be bought or sold without significantly affecting its price.

Detailed definition: Liquidity in financial markets refers to the ease with which an asset can be converted to cash or another asset. High liquidity means transactions can occur quickly and at stable prices, while low liquidity may result in price volatility and slippage during large trades.

Market Cap

Basic definition: The total market value of a cryptocurrency, calculated by multiplying its current price by the total supply in circulation.

Detailed definition: Market capitalization is a metric used to gauge the relative size and market value of a cryptocurrency. It is computed as:

Market cap = Current price x Circulating supply

This figure helps investors compare the scale of different cryptocurrencies within the market.

Merkle Tree

Basic definition: A data structure used to efficiently verify the integrity of large sets of data in blockchains, particularly useful in confirming transactions.

Detailed definition: A Merkle tree is a binary tree where each leaf node represents a hash of transaction data, and each non-leaf node is a hash of its child nodes. This structure allows for efficient and secure verification of large datasets, enabling simplified payment verification (SPV) in lightweight clients without downloading the entire blockchain.

Mining

Basic definition: The process by which transactions are verified and added to the blockchain, involving the solving of complex mathematical problems.

Detailed definition: Mining involves using computational power to solve cryptographic puzzles (hashing) that validate new transactions. Once a puzzle is solved, the miner creates a new block and broadcasts it to the network. In return, miners receive block rewards and transaction fees, securing the network and ensuring decentralized consensus.

Mining Pool

Basic definition: A group of miners who combine their computational resources to increase the likelihood of mining a block and sharing the rewards.

Detailed definition: Mining pools aggregate the processing power of multiple miners to solve PoW puzzles more consistently, reducing variance in individual mining rewards. Once a block is mined, rewards are distributed among participants according to their contributed hash rate, although pool fees and centralization risks must be considered.

NFT (Non-Fungible Token)

Basic definition: A unique digital asset representing ownership of a specific item or piece of content, such as art, music, or collectibles.

Detailed definition: NFTs are cryptographic tokens that represent unique items using blockchain technology, typically conforming to standards like ERC-721 or ERC-1155. Their non-fungible nature means each token has distinct information, making them ideal for verifying ownership and provenance of digital assets.

Node

Basic definition: A computer that participates in the blockchain network by validating and relaying transactions and blocks.

Detailed definition: A node is any device connected to the blockchain network that runs software to validate and propagate transactions and blocks. Full nodes maintain a complete copy of the blockchain, while light nodes (or SPV nodes) rely on full nodes for transaction verification, contributing to network decentralization and resilience.

Non-Custodial Wallet

Basic definition: A wallet where the user has full control over their private keys and, consequently, their cryptocurrency funds.

Detailed definition: Non-custodial wallets give users complete control over their keys and funds, operating on a “self-sovereign” principle. This model enhances security and privacy but places the full responsibility of safeguarding keys on the user, necessitating robust backup and security practices.

Private Key

Basic definition: A secret alphanumeric code that provides access to your cryptocurrency funds; it must be kept secure.

Detailed definition: A private key is a randomly generated number used in asymmetric cryptography. It serves as the signature for transactions, proving ownership of the associated cryptocurrency. Compromise of a private key can lead to loss of control over the funds, hence the emphasis on secure storage and management.

Proof of Stake (PoS)

Basic definition: An alternative consensus mechanism where validators are chosen based on the amount of cryptocurrency they hold and are willing to “stake” as collateral.

Detailed definition: In PoS systems, validators lock up (stake) a portion of their cryptocurrency as collateral to gain the right to validate transactions and create new blocks. The probability of being chosen is typically proportional to the amount staked, reducing energy consumption compared to PoW and aligning validators’ incentives with the network's health.

Proof of Work (PoW)

Basic definition: A consensus mechanism where miners compete to solve computational puzzles to validate transactions and earn rewards.

Detailed definition: PoW requires participants to expend computational resources to solve cryptographic puzzles, ensuring that only legitimate transactions are added to the blockchain. This mechanism deters malicious actors by making attacks (like double-spending) prohibitively expensive, while incentivizing honest mining through block rewards.

Public Key

Basic definition: A cryptographic code that can be shared publicly and is used to receive cryptocurrency transactions.

Detailed definition: The public key is mathematically derived from the private key and is used to create a wallet address. It allows others to encrypt information or send funds that only the holder of the corresponding private key can access. In many systems, the public key is hashed to create an address for improved security.

Rug Pull

Basic definition: A scam where developers abruptly withdraw all funds from a cryptocurrency project, leaving investors with worthless tokens.

Detailed definition: In a rug pull, project developers create a cryptocurrency or DeFi platform, promote it to attract investment, and then suddenly drain the liquidity pool or funds, effectively abandoning the project. This exit scam exploits investor trust and the often-anonymous nature of many crypto projects.

Sharding

Basic definition: A scalability solution that divides a blockchain network into smaller partitions (shards) to increase transaction throughput.

Detailed definition: Sharding splits the blockchain’s data into smaller, manageable pieces (shards), each processed by a subset of nodes. This parallel processing reduces congestion and increases overall network throughput, though it introduces challenges in cross-shard communication and security.

Single-share Backup:

Basic definition: The default wallet backup you make when setting up a new Trezor Device.

Detailed definition: A 20 word wallet backup containing the data needed to upgrade it to a Multi-share Backup.

Smart Contract

Basic definition: Self-executing contracts where the terms of the agreement are written into code and automatically enforced.

Detailed definition: Smart contracts are self-contained programs deployed on a blockchain that automatically execute and enforce agreements when predefined conditions are met. They reduce the need for intermediaries, provide transparency, and minimize the risk of human error, while relying on the immutability and security of the underlying blockchain.

Satoshi (sat)

Basic definition: The smallest unit of bitcoin, equal to 0.00000001 BTC (one hundred millionth of a bitcoin), named after Bitcoin’s creator.

Detailed definition: A satoshi represents 10⁻⁸ bitcoin and is used to facilitate micro-transactions. It enables precise pricing and transactions on the Bitcoin network, particularly as the value of a single bitcoin increases.

Shamir backup (SLIP39)

Basic definition: SLIP39 is the security standard where your wallet backup is split into several parts, called shares. You only need a certain number of these shares (the threshold) to restore your wallet, which helps protect you if one share is lost or stolen. Since June 2024, SLIP39 has been the default backup method on the Trezor Model T and Trezor Safe series.

Detailed definition: Shamir Backup is a secure recovery method based on the SLIP39 standard. It splits a wallet backup into multiple 20-word shares that are mathematically linked. During setup, the user selects how many total shares to create and how many are required to recover the wallet—this number is called the threshold. To regain access, the user must combine at least the threshold number of valid shares. This approach protects against both loss and theft: one lost share doesn’t prevent recovery, and one stolen share isn’t enough to compromise the wallet. Shamir Backup replaces the older 12-/24-word wallet backup format (BIP39) with a more resilient and flexible system and is supported on select Trezor devices.

Soft Fork

Basic definition: A backward-compatible protocol update that allows upgraded nodes to interact with non-upgraded ones without splitting the blockchain.

Detailed definition: A soft fork is a protocol upgrade that tightens the rules of the network while remaining compatible with older nodes. Upgraded nodes can enforce new rules that older nodes recognize as valid, provided that the changes do not conflict with the underlying consensus, thereby avoiding a chain split.

Token

Basic definition: A digital asset created on an existing blockchain that can represent a variety of assets or utilities.

Detailed definition: Tokens are created using standardized protocols (such as ERC-20 on Ethereum) and can represent anything from utility access in a decentralized application to ownership in an asset. They do not have their own blockchain but instead operate on top of an existing blockchain platform.

UTXO (Unspent Transaction Output)

Basic definition: An amount of Bitcoin (or another UTXO-based cryptocurrency) your wallet controls.

Detailed definition: UTXO stands for . It represents a discrete unit of cryptocurrency received in a previous transaction that has not yet been spent. In Bitcoin and other UTXO-based blockchains, each transaction consumes one or more UTXOs as inputs and creates new UTXOs as outputs. These outputs become available for future transactions. UTXOs are fundamental to how balances are calculated and how coins are selected when making a transaction. Trezor Suite uses UTXOs to manage inputs and optimize privacy and fee efficiency during coin selection.

Wallet

Basic definition: A digital tool (software, hardware, or paper-based) used to store, send, and receive cryptocurrencies.

Detailed definition: Cryptocurrency wallets manage key pairs (public and private keys) using various formats: software wallets (desktop, mobile, or online), hardware wallets (physical devices that store keys offline), and paper wallets (printed keys). They interact with the blockchain to initiate transactions and monitor balances.

Wallet backup:

Basic definition: A list of 12, 18, 20, or 24 words you can use to recover a cryptocurrency wallet.

Detailed definition: A wallet backup is a human-readable list of 12, 18, 20, or 24 words that encodes the cryptographic secret, known as a seed, that generates all keys, accounts, and addresses in a Trezor hardware wallet. This wordlist is the only way to recover access to your wallet if your device is lost, stolen, or damaged. Wallet backups follow either the BIP39 or SLIP39 standard, depending on your device and backup configuration.