Chapter 1: Terms and Records
Glossary of Common Crypto Terms
Effective communication among parties depends on a shared set of well-defined technical terms. For instance, the list below contains definitions for technical terms. These definitions were created to accompany various discovery requests (such as the Model Forms for requests for records from a crypto account holder or requests for records from a crypto exchange, which are available to members of the Forensics Board Association).
Cryptocurrency – any digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value including but not limited to virtual currency (see additional, but not limiting descriptions of virtual currency in IRS Rev. Rul. 2019-24 and Notice 2014-21). Examples of cryptocurrency include but are not limited to those that include encryption methods to validate or maintain records such as bitcoin, bitcoin cash, bitcoin SV, litecoin, ether, dogecoin, and over 1,000 others. Other industry terms such as digital asset, coin (e.g. those issued in an Initial Coin Offering (ICO)), token (e.g. those issued in a Simple Agreement for Future Tokens (SAFT)), virtual currency, non-fungible tokens (NFTs), and digital cash are included in the term Cryptocurrency.
Cryptocurrency Fork – any permanent diversion from a blockchain that results in a new cryptocurrency in addition to the original cryptocurrency from which the diversion occurred (See additional, but not limiting, descriptions in IRS Rev. Rul. 2019-24). An example of an original cryptocurrency and fork are Bitcoin and Bitcoin Cash, respectively.
Cryptocurrency Wallet – a device or software that enables access to and/or management (such as sending and receiving) of cryptocurrency stored at one or multiple cryptocurrency addresses. Companies providing wallet software or devices may offer more than one type of wallet and exchanges may offer wallet services. A wallet account is typically created and controlled by an individual user, not the company that provides the software or hardware. There are five basic types of wallets:
1) hardware, such as the Ledger, Trezor, and KeepKey (this is a physical device that can be a card, a ring, a USB device, and more)
2) desktop, such as Atomic, Electrum, Exodus, and Bitcoin Core (this is software downloaded onto a computer)
3) mobile, such as Mycelium, Coinomi, and Electrum (this is software downloaded onto a mobile device)
4) web-based, such as MetaMask, Typhon, etc. (this is software accessed through a website or browser plug-in using login information entered by the user or stored by the browser, some of these service providers also provide software that can be downloaded onto a computer or mobile device)
5) paper, such as a piece of paper with a private key(s), seed words, and/or addresses written down or printed onto it.
Note: The named brands are not endorsements in any way and some may have been deprecated or collapsed. Also note that software providers may have more than one offering: an exchange and a wallet (such as OKX and Coinbase), or a desktop, mobile, and web-based wallet.
Cryptocurrency Address – a string of alphanumeric characters displayed on the blockchain, if public, and which is used in a transaction to send and/or receive cryptocurrency. All cryptocurrency transactions contain at least one cryptocurrency address.
Cryptocurrency Exchange – software that enables users to engage in purchases or sales of cryptocurrency. Most exchanges also provide limited wallet functions within an account to enable users to send or receive cryptocurrency in addition to buying or selling cryptocurrency. Exchanges provide transaction histories that show cryptocurrency addresses used in transactions made by or on behalf of the user. An exchange account is typically created by a user, but the assets are controlled by a company such as they are in a traditional brokerage or bank account. Note: This definition refers to centralized exchanges; decentralized exchanges also exist and records for interactions with those are typically obtained from the account holder using wallet software and from public blockchain records.
Cryptocurrency Transaction – the purchase, sale, sending, or receipt of cryptocurrency through a wallet, exchange, agreement, or physical transfer of a storage device. Cryptocurrency transactions that occur through a wallet are displayed on that cryptocurrency’s blockchain, if public, and are assigned a transaction id. Note: Transaction records obtained from public blockchains may not be sufficient to fulfill this request; records must be provided from the wallet, exchange, or other account used to access cryptocurrency.
Blockchain – a linked list of data related to a specific cryptocurrency, also referred to as digital ledger or digital ledger technology.
Block Reward – An amount of cryptocurrency received at a cryptocurrency address in return for work performed by a computer, also known as a miner. The amount of cryptocurrency received may originate from new cryptocurrency or from transaction fees.
Miner – The computer or device running specialized software to submit, group, and/or validate cryptocurrency transactions; this action is also referred to as mining. The individual or organization operating the device is also sometimes referred to as a miner.
Proxy – An individual or organization authorized to act on behalf of another individual or organization.
Account – Any software or device, including wallets, exchanges, and retail websites that enable the storage of, access to, or transactions with currency, including cryptocurrency, is herein referred to as an account. The term account includes bank accounts, investment accounts, cryptocurrency exchange accounts, cryptocurrency marketplace accounts, payment services accounts, decentralized finance accounts, cryptocurrency wallet software, and cryptocurrency wallet devices.
Don’t worry; there are pictures in the other lessons.