Glossary

A potential attack on a blockchain network where a malicious actor or group of actors gains control of more than 50% of the network’s mining hash rate, allowing them to manipulate the blockchain’s operations.

A list of users authorised to request a recovery or add or remove other members of the ACL.

In simple terms an altcoin is any cryptocurrency other than Bitcoin. ‘Alt’ = alternative to Bitcoin.

Refers to the activities and checks financial institutions must perform to comply with regulations requiring them to monitor and report suspicious activities.

A sustained period of declining prices and negative sentiment across the cryptocurrency market as a whole or for specific cryptocurrencies.

Bitcoin is a cryptocurrency, a virtual currency designed to act as money and a form of payment outside the control of any one person, group or entity, removing the need for third-party involvement in financial transactions. As the original cryptocurrency, Bitcoin is still the largest by market cap (a cryptocurrency’s current total value). Bitcoin was created by Satoshi Nakamoto (thought to be a pseudonym) and launched in 2009.

A blockchain is a distributed database or ledger that is shared among the nodes of a computer network. A blockchain stores information electronically in digital format. Best known for their role in cryptocurrency systems for maintaining a secure and decentralised record of transactions in blocks linked together in a chain. It’s an immutable database, meaning records can’t be modified or deleted.

A sustained period of rising prices and positive sentiment across the cryptocurrency market as a whole or for specific cryptocurrencies.

Consensus is the process by which a group of peers/nodes on a network authorize which blockchain transactions are valid or not. The consensus mechanisms are the methods used to achieve the agreement. In turn, these form sets of rules that help to protect networks from malicious behaviour and hacks.

There are many types of consensus mechanisms depending on the blockchain and what it’s used for. They all differ in their energy requirements, security, and scalability – but all ensure that records are honest and true. The two most prevalent consensus mechanisms are proof-of-stake (PoS) and proof-of-work (PoW) – but there are several more.

Like the ledgers used by traditional finance systems to track transactions completed in a certain period, crypto ledgers track value as it moves around, so you can see where value resides at any given moment. A crypto ledger keeps an immutable record of all transactions on a cryptocurrency network, helping to keep users’ identities anonymous, while still maintaining an accurate history of transactions on any network.

Custodian

Nearly always web-based and are usually provided by centralised crypto exchanges. A custodian provides storage solutions for digital assets like cryptocurrency. They are responsible for keeping people’s assets safe by holding their keys and ensuring they can’t be accessed by anyone else. Examples of custodians are Coinbase and Uphold (one of our customers. Customers benefit from the peace of mind that a lost or forgotten password won’t result in the loss of funds.  

Non-custodian

There’s a common saying in crypto, “not your keys, not your crypto”, which essentially means whoever holds the private key is the only verifiable owner to the funds. Non-custodial (aka self-custody) wallets give users complete control over their private keys (and crypto). The user is responsible for protecting their assets. Some non-custodial wallets are browser-based, but there are other types available such as; software wallets that store and encrypt private keys on a computer hard drive and hardware wallets that resemble a USB thumb drive and are only online when connected to a computer or mobile device.

Coincover is NOT a custodian; we hold the backup of keys, not the keys themselves. 

A decentralised application is a type of distribute, open-source software application that runs on a peer-to-peer blockchain network rather than on a single computer. This means that unlike other applications, the decentralised nature of DApps means that once a developer has released a codebase others can build on top of it – often build using the Ethereum platform.

An emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. De-Fi uses the blockchain to make transactions without going through a centralised financial institution like a bank or broker. De-Fi eliminates fees that banks and other financial companies charge for using their services. 

A digital asset is generally anything that is created and stored digitally, is identifiable and discoverable, and has or provides value. Digital assets have grown in popularity and value as technological advances become integrated into our everyday lives. In short, digital assets is the generic term for all assets created, traded and stored in a digital format. Cryptocurrency, NFTs and tokens are examples.  

DLT refers to the technological infrastructure and protocols that allows simultaneous access, validations and record updating. These updates are immutable across a network that spread across multiple entities or locations. More commonly known as blockchain technology, DLT is all about decentralisation rather than the conventional centralised mechanism.

Founded by Vitalik Buterin and launched in 2015. Ethereum is an open source blockchain network that allows people to build decentralised apps and organisations like gaming and supply chain management systems. Rather than using Ethereum to create and transfer cryptocurrency like Bitcoin, Ethereum is programmable so you can build and deploy decentralised applications on its network. Ethereum also uses smart contracts to facilitate transactions.  

Ethereum’s native cryptocurrency is called ETH and is the second largest by market cap.

The process or converting plaintext data into ciphertext, making it unreadable to anyone without the proper decryption key. Encryption plays an important role in ensuring the security and confidentiality of sensitive information.

The technical standard for fungible tokens created using the Ethereum blockchain. The Ethereum network is a platform other tokens can run on and the ERC 20 provides a way for  different smart contract enabled tokens to be exchanged. When creating tokens, developers must comply with this standard when creating tokens on the network to ensure that they can be exchanged. There are over 750,000 token contracts, according to Etherscan. 

Spot ETF

A spot ETF is an exchange-traded fund designed to mirror the real-time or "spot" price of an underlying asset. When it comes to cryptocurrencies, a spot ETF aims to replicate the present market value of assets like Bitcoin, Ethereum, or other cryptocurrencies.

The FCA is a financial regulatory body in the United Kingdom, operating independently of the Uk government.  Its role includes protecting customers, keeping the industry stable and promoting healthy competition between financial service providers.

A type of currency that is declared as legal tender by a government but has no intrinsic or fixed value and is not backed by a tangible asset such as gold or silver.  The value of fiat currency is guaranteed by the issuing government, who can also control the supply of money in response to economic fluctuations. 

Refers to ways of making financial processes and traditional financial services more accessible with the use of new technology. FinTech can include software, apps, and products all built with the aim of improving traditional processes. FinTech companies are those that employ technology to adapt, improve or totally automate financial services. Think about the technology that has turned your phone into a payment mechanism!

FOMO is a common acronym that can be used in any social or business setting. FOMO in reference to the crypto industry specifically refers to an intense feeling that you are missing out on the next big crypto development, and more importantly the opportunity to make big profits. For example, FOMO could be  used when investors think there’s going to be a price movement that could make them money so they make an emotional investment decision to buy or sell based on unverified information.

Refers to the general mindset of pessimism about a particular asset or market, as well as the manipulation of investor or consumer emotions so they succumb to FUD. This manipulation can include spreading negativity online to create uncertainty or fear about a particular coin or token so the price drops. 

Fungible tokens are those that can be interchanged with one another, normally on an exchange, whereas the well-known non-fungible tokens (NFTs) are not interchangeable.

Futures ETFs are more commonly traded than Spot ETFs, but they can be more volatile than spot ETFs. They track the future price of an asset.

A hash is a mathematical function that meets the encrypted demands needed to solve for a blockchain computation. Typical hash functions take inputs of variable lengths to return outputs of a fixed length. The fixed length makes it nearly impossible to guess the length of the hash of someone was trying to crack the blockchain.

The clue is in the name, to HODL is an encouragement to other crypto investors not to sell when prices fall. Considered as more of a mentality than an investment strategy, the HODL approach has been rewarding long-term investors in Bitcoin, Ether and other leading cryptocurrencies. 

One of the central features of the blockchain, once it’s on there, data can’t be changed, manipulated or replaced.  

A set of security processes and tools that protect sensitive business information and data from unauthorised access, misuse, disruption, or destruction by mitigating risks.  

Our customers often ask us if we comply with any infosec frameworks. We are ISO27001 certified and are working towards SOC2 (more info below).

An internationally recognised standard for information security. It provides a framework to help organisations protect their information using an Information Security Management System (ISMS). The ISMS equips organisations with a set of rules and policies that they follow to maintain both online and physical security.    

CoinCover is ISO27001 certified, we’ve been audited, and our security controls are robust and meet the ISO standard. When customers do due diligence on us, they expect us to have an information security certification, and we provide them with our ISO27001 certificate.

Standards designed to protect financial institutions against fraud. To meet KYC requirements, clients must provide proof of the identity and address, such as ID card verification, face verification, biometric verifications and/or document verification. These checks must be completed by exchanges and trading platforms and involve separate steps to establish identity, understand the nature of customers activities and qualify that source of funds is legitimate.      

CoinCover also carries out KYC checks on customers’ ACL members and confirms their identities before carrying out a recovery. 

Used in both traditional finance and cryptocurrency markets, it represents the total circulating value of a specific cryptocurrency. The formula for calculating market capitalization formula is:

Market Cap = Price per unit x Total circulating supply

A term used to refer to cryptocurrencies named after characters, individuals, animals, artwork, or anything else that can be mimicked and are generally intended to be light-hearted and fun. Unlike traditional cryptocurrencies, such as Bitcoin and Ethereum, which have specific technical or usability purposes, meme coins may hold little to no intrinsic value.

The process of creating digital coins. The process is quite complicated and involves solving complex puzzles, validating cryptocurrency transactions and adding newblocks to their retrospective distributed ledger, ultimately, verifying transactions.  

A vast network of computers validates the transactions and creates the blocks using either ‘proof of work’ or ‘proof of stake’. Miners are paid for doing this in the crypto native to the chain they are mining on.  

Multiple parties are needed to authorise transactions. Each party holds part of a private key stored on different devices, and the other parties can’t see them.  MPC is a subfield of cryptography with the goal of creating methods for parties to jointly approve an action, while keeping their inputs private.

Fireblocks use this approach. The private key to one of their workspaces is created in multiple parts (key shares or shards). The key is never combined as a whole, the customer holds one shard in their mobile signing device, and Fireblocks hold the others in the cloud. Coincover holds the backup to the shards.

A multisig wallet is a digital wallet that operates with multi-signature addresses. As an additional layer of security, more than one key is needed to authorise transactions, or in some cases several different keys are required to generate a signature for a transaction.

A non-fungible token (NFT), is something that is unique and cannot be replaced. This is the opposite from physical money and cryptocurrency, which are fungible, and can be traded or exchanged for one another. Every NFT is a cryptographic asset that sits on the blockchain with unique ID codes and metadata that distinguishes it from other NFTs. These digital assets could be photos, videos, audio files or other digital formats. NFT examples include artwork, comics, sports collectibles, trading cards, games and more.

Nodes in cryptocurrency are usually associated with the blockchain, that exist with the purpose of verifying each transaction on the blockchain, or distributed ledger, before it’s permanently stored on the block. Nodes are made up of computers on the blockchain that validate transactions and store transaction histories.

A block that has been successfully solved within the blockchain network, but not accepted by the network. They can occur when two miners find a valid block at approximately the same time, but they can only accept one block at each height, and therefore the block not chosen becomes orphaned. These can occur frequently and often by chance, an average of 1 to 3 of all blocks generated in the Bitcoin network everyday are orphans. Also known as a stale block.

Like a password, a private key is a secure code that allows users to access their crypto wallets, make transactions and prove ownership of their assets. Bitcoin as an example features a 256-bit string displayed as a combination of letters and numbers. It’s stored in the user's crypto wallet, enabling them to access their Bitcoin whenever they want. 

Unlike the private key, the public key is designed to be shown to other crypto users so they can send cryptocurrency to your wallet (think account number or IBAN). The public key is a cryptographic code used to facilitate transactions and receive crypto into your account, although a Bitcoin address can also be used for transactions as it’s essentially a compressed version of the public key.  

You’re issued a private and public key when you start a transaction. The private key is used to digitally sign a transaction, and the public key proves the digital signature came from your private key. The crypto is only sent to the recipient’s public address once the transaction is verified.

A system for processing and validating transactions to create new blocks in the blockchain. This consensus mechanism is a method for validating entries into a distributed database and keeps the database secure. Like Proof of Work (PoW), this method determines who can add new blocks. Users stake their tokens as collateral so they can validate transactions, validating block transactions based on the number of staked coins. It’s worth noting that PoS uses far less electricity than PoW, and was designed to reduce network congestion and environmental concerns surrounding the PoW protocol. 

The process behind mining and determining which miner can add new blocks to the blockchain. Miners must solve a mathematical problem to confirm a transaction, and the fastest miner gets rewarded in crypto. This method uses enormous amounts of electricity, leading to environmentalists' criticism.  

PoS and PoW use consensus-based mechanisms where nodes determine which transactions are valid. The consensus mechanism helps protect networks and make sure their records are correct.  

A decentralised transaction method that allows sharing data on a network directly between two parties without needing a server. 

Transferring money between fiat and crypto is known as “on-ramping” and “off-ramping”. On-ramps and off-ramps act as links between the two types of currencies.  

On-Ramp  

On ramps let users convert fiat currencies, or traditional currencies into crypto.    

Off-Ramp  

Off ramps are where crypto is swapped for fiat, like cashing out chips at a casino. 

If a customer experiences a disaster (e.g., loses their private key or whoever holds the key leaves the business), a recovery is the process of helping that customer regain access to their assets.  

Lists people, groups, companies, regimes and countries subject to restrictive measures under domestic and international sanctions regimes. Sanctions lists are created to stop illegal activity, including the financing of terrorism, drug trafficking and money laundering.  

CoinCover carries out sanctions screening on our customers and suppliers to comply with AML regulations. It is part of our due diligence process and is managed by our Legal and Customer Support departments.

The pseudonym for the person or people that helped develop the first bitcoin software and introduced the concept of cryptocurrency to the world in a 2008 paper. While not the first the hit on the concept of crypto, Nakamoto was the first to solve a fundamental adoption problem. Unlike paper currency, crypto could be duplicated or “double spent” – Nakamoto solved it by creating the blockchain system of verification.

A type of cryptocurrency that represents fractions of assets that have real world value such as equity, a company, real estate etc. They are a digital representation of ownership or right to an asset that has been tokenized and stored on a blockchain. While they are nearly identical to the cryptocurrencies you may be familiar with but the main difference is crypto is designed for use while a security token is intended to be used the same way as a stock, bond, certificate or other investment asset. 

Think of a seed phrase as your crypto wallet’s master key or password that helps you regain access to your crypto wallet and the value held within it in the case of broken hardware or lost web access. It’s random sequence of 12, 18, or 24 words pulled from a list of 2048 words. If you lose access to your wallet or delete it by accident without ensuring your seed phrase is saved securely, you will lose access to your assets.

Check out Ledger Recover by CoinCover – Wallet recovery made easy.

Breaking up data into smaller segments so it can be processed in parallel. Sharding creates shards, each of which has its own data. It enables blockchain companies to process more transactions per second.    

Fireblocks’ customers’ private keys are split into three shards, and we store the encrypted backup of all three.

Programmes, founded on the Ethereum network, are stored on the blockchain technology and run automatically when predetermined conditions are met. They are typically used to automate the execution of an agreement so all involved participants can be immediately certain of an outcome. Smart contracts eliminate the need for an intermediary to verify or execute a transaction and are traceable on the blockchain. 

Similar to ISO27001, SOC 2 is an international cybersecurity compliance framework which focuses on:  

• Security  
• Confidentiality  
• Availability (of systems)  
• Privacy  
• Processing integrity.  

Cryptocurrencies  whose value is ‘pegged’, or tied, to another currency, commodity, or financial instrument, for example, the US dollar. Stablecoins aim to provide an alternative to the high volatility of most popular cryptocurrencies by maintaining reserve assets as collateral or through algorithms to control supply.  

A way of earning rewards for holding certain cryptocurrencies. You stake (lock in) your assets to participate in running the blockchain and maintaining its security. Only a few cryptocurrencies allow staking including Ether, Tezos, Cosmos, Solana and Cardano - you stake some of your assets and earn a percentage-rate reward over time. The reason you earn rewards while your assets are staked is because they are put to work, under PoS (see above), where they are used to ensure all transactions are verified and secure without a bank or payment processor in the middle.

Our transaction monitoring technology protects businesses and their end users by screening and identifying suspicious transactions in real time. Using our crypto threat intelligence database with machine learning models, we continuously monitor transactions to prevent theft, hacks, and scams. 

Tokens are digital currencies that hold value and can be bought and sold by investors and users on blockchain and crypto exchanges. They are generally created on existing blockchains, so creating a token is much faster and cheaper as developers don’t need to build an entirely new blockchain.  

A type of digital token that provides access to a specific product or service within a decentralised ecosystem or platform. These are commonly issued during initial coin offerings or initial dex offerings. The holder can enjoy certain benefits because of their purchase, including access to specific services or discounted fees. Holders could also vote on the improvement proposal of an upcoming dApp for example. The most widely used token standard for utility tokens is the ERC-20 token standard developed on the Ethereum network.

A crypto wallet stores your public and/or private key, keeping your crypto safe and accessible. They allow you to store, receive and send your cryptocurrencies..  

Hot wallets  

Are web-based wallets, mobile wallets and desktop wallets that are connected to the internet, and private keys are stored online. The main benefit of hot wallets is ease-of-use. Because they are always online, transactions can be created and recorded automatically without any human intervention. They are the easiest and quickest way to trade crypto, for example many people use their mobile hot wallets to trade or make purchases with cryptocurrency..  

Warm wallets  

Warm wallets function like hot wallets, keys are stored online, and transactions can be created automatically. The main difference is that they are usually software that is downloadable, unlike hot wallets that are offered by most exchanges. Moreover, warm wallets require the use of 12-digit passcodes or PIN for authentication. Essentially, transactions must be signed and sent to the blockchain by a person rather than automatically.  

Cold wallets  

The most secure wallet as your keys are stored offline. Stealing from a cold wallet usually would require physical possession of access to a cold wallet, as well as any associated PINs or passwords that are required to access funds. Hardware wallets are designed to be immune to hacking, even when connected to your computer or mobile. You need to sign each transaction to record it on the blockchain. Hardware wallets are less convenient than hot wallets because they must be turned on and then connected to the internet, so live trading would generally be too slow.  

In the crypto ecosystem, whitelists relate to either withdrawal addresses or Initial Coin Offerings (ICO).  

For withdrawal addresses, a whitelist is a list of cryptocurrency addresses that users identify as trustworthy. They would only be able to withdraw funds from their exchange account to addresses that have been whitelisted.  

With ICOs, potential investors effectively pre-register to take part in the initial sale of a token. Then, when the new token is launched, verified whitelisted users can take part in the initial sale.

An XYZ domain is a generic top-level domain (gTLD). Popular with blockchain companies for its neutrality and modern appeal, it attracts tech-savvy, forward-thinking individuals. These users, valuing innovation and decentralization, are potential crypto adopters, driving the future of digital finance. 

A zero confirmation transaction is any transaction that has not been recorded or validated on a blockchain. If this does happen there is a risk of double spending where the sender could potentially attempt to spend the same funds again, causing conflict or inconsistency in the blockchain’s transaction history. If this occurs, the miners on the block will only confirm one of the transactions.

These models operate on the principle of “never trust, always verify”. They assume that every individual or device, both internal and external to the network could be a threat due to either malicious behaviour or human error. These systems require users and devices to be authenticated, authorized, and continuously validated before access to resources is granted.

An increasingly common way to achieve privacy on a public blockchain network. This method allows one party to cryptographically prove to another that they possess knowledge about a piece of information without revealing the actual underlying information. At a high-level, a ZKP works by having a verifier ask the prover to perform a series of actions that can only be performed accurately and successfully if the prover knows the underlying information. If the prover is simply guessing, they will eventually be tripped up by the test with a high degree of probability.