Blockchain Glossary: From A-Z
The Glossary for the Emerging Blockchain Landscape, serves as a documentation of my learning and observations, and it may be helpful to you.
51% Consensus
When more than half of the computing power of a cryptocurrency network (Bitcoin, ethereum, etc) has “consensus” that a particular block of transactions has been successfully solved, it stops the current process of finding hashes in the block. This network then adds a new block to the blockchain. The node participants and miners will proceed to process the bunch of transactions in the added block.
Address
Cryptocurrency addresses are used to send or receive transactions on the network. An address usually presents itself as a string of alphanumeric characters.
Example, a Bitcoin address, or simply address, is an identifier of 26-35 alphanumeric characters, beginning with the number 1 or 3, that represents a possible destination for a bitcoin payment.
Common P2PKH which begin with the number 1, eg: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2.
Newer P2SH type starting with the number 3, eg: 3J98t1WpEZ73CNmQviecrnyiWrnqRhWNLy.
Altcoin
Altcoin is an abbreviation of “Bitcoin alternative”. Currently, the majority of altcoins are forks of Bitcoin with usually minor changes to the proof of work (POW) algorithm of the Bitcoin blockchain. The most prominent altcoin is Litecoin. Litecoin introduces changes to the original Bitcoin protocol such as decreased block generation time, increased maximum number of coins and different hashing algorithm
ASICs
ASICs, short form for ‘Application Specific Integrated Circuits’, are specially made for cryptocurrency mining and may offer significant power savings, versus conventional multi-core Central Processing Units (CPUs). Note that Bitcoin ASIC chips generally can only be used for Bitcoin mining.
Bitcoin
Bitcoin is the first decentralised, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralised coin issuer. This word can refer to the specific currency, Bitcoin (BTC), and it can also refer to the specific blockchain that supports it.
Block
Blocks are packages of data that carry permanently recorded data on the blockchain network. A block commonly consists of four pieces of metadata:
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- The reference to the previous block
- The proof of work, also known as a nonce
- The timestamp
- The Merkle tree root for the transactions included in this block.
Blockchain
A blockchain is a shared ledger where transactions are permanently recorded by appending blocks, in a tamper-proof way. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain. It can be both permissionless (like Bitcoin or Ethereum) or permissioned (like the different Hyperledger blockchain frameworks).
There are no administrator permissions within a blockchain that allow editing or deleting of data. Blockchains were designed for decentralized applications.
Blockchain is a new form of digital infrastructure, applications built on top of a blockchain provide a gateway to accessing information that sits on that blockchain. In other words, clients/users interact with the blockchain through applications. Starting from the simple wallets that hold bitcoins, sophisticated applications which encompass applications addressing digital identity (e.g. UPort, KYC-Chain, Netki, etc.), and complex financial transactions are being built on the blockchain.
Block Explorer
Block explorer is an online tool to view all transactions, past and current, on the blockchain. They provide useful information such as network hash rate and transaction growth.
Block Height
The number of blocks connected on the blockchain.
Block Reward
A form of incentive for the miner who successfully calculated the hash in a block during mining. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.
Central Ledger
A ledger maintained by a central agency.
Confirmation
The successful act of hashing a transaction and adding it to the blockchain.
Consensus
Consensus is achieved when 51% Consensus of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.
Cryptocurrency
A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. It facilitates parties to transact without necessarily having to verify each other’s identity.
Some of the better known cryptocurrencies are Bitcoin, Ethereum and Litecoin. Every cryptocurrency has its own blockchain.
Cryptographic Hashes
Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input. The SHA-256 computational algorithm is an example of a cryptographic hash.
Dapp
Decentralised application (Dapp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivised in the form of cryptographic tokens and operates on a protocol that shows proof of value.
Bitcoin could be considered the first Dapp, as it is fully open-source, rewards contributors, runs without a central authority and uses blockchain technology to help facilitate its continued use case as an online currency.
Ethereum’s decentralised blockchain and its native digital currency Ether are proving perhaps the most widely used tools for dapp building, as its network is specifically built for the purpose and the Ethereum Foundation, its trade organization overseeing development, runs regular ‘hackathon’ events to promote new decentralized applications
DAO
Decentralised Autonomous Organizations (DAO) can be thought of as those corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules.
Distributed Ledger
Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not have to have its own currency and may be permissioned and private.
Distributed Network
A type of network where processing power and data are spread over the nodes rather than having a centralised data centre.
Difficulty
This refers to how easily a data block of transaction information can be mined successfully.
Digital Identity
A digital identity is an online or networked identity adopted or claimed in cyberspace by an individual, organization, or electronic device.
Digital Signature
A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender’s identity.
Double Spend
Double spend refers to a scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recipients at the same time. However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.
Ether
Ether is the native token of the Ethereum blockchain which is used to pay for transaction fees, miner rewards and other services on the network.
Ethereum
Ethereum is a blockchain-based decentralised platform for apps that run smart contracts, and is aimed at solving issues associated with censorship, fraud and third party interference.
Exchange
Currency exchange is when people trade one kind of money for another kind of money. Coinbase is one example of a company that operates an exchange for cryptocurrencies. There exchange is called GDAX.
EVM
The Ethereum Virtual Machine (EVM) is a Turing complete virtual machine that allows anyone to execute arbitrary EVM Byte Code. The EVM code associated with an account is executed every time a message is sent to that account, and has the ability to read/write storage and itself send messages. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.
Fiat / Fiat money / Fiat currency
This is a currency issued by a government regulation or law. Also it described as “legal tender”, example, Euro, US Dollars, British pounds. Fiat money is centralized currency. There is a central authority in charge of regulating and producing it.
Foreign Exchange Rate
“How much is that in US dollars?”. You’re asking about the exchange rate. Some people trade foreign currencies based on predictions of what the exchange rates will be. Forex trading describes that work.
FOMO
Fear Of Missing Out
Fork
A fork is the creation of an ongoing alternative version of the blockchain, by creating two blocks simultaneously on different parts of the network. This creates two parallel blockchains, where one of the two is the winning blockchain.
FUD
Fear of uncertainty and doubt
Gas
Gas is a measurement roughly equivalent to computational steps (for Ethereum). Every transaction is required to include a gas limit and a fee that it is willing to pay per gas; miners have the choice of including the transaction and collecting the fee or not. Every operation has a gas expenditure; for most operations it is ~3–10, although some expensive operations have expenditures up to 700 and a transaction itself has an expenditure of 21000.
Genesis Block
The first or first few blocks of a blockchain.
Halving
Halving: Bitcoins have a finite supply, which makes them a scarce digital commodity. The total amount of bitcoins that will ever be issued is 21 million. The number of bitcoins generated per block is decreased 50% every four years. This is called “halving.” The final halving will take place in the year 2140.
Hard Fork
A type of fork that renders previously invalid transactions valid, and vice versa. This type of fork requires all nodes and users to upgrade to the latest version of the protocol software.
Hash
The act of performing a hash function on the output data. This is used for confirming coin transactions.
It is a measurement of performance of the mining rig (in hashes per second).
Hybrid PoS/PoW
A hybrid PoS/PoW allows for both Proof of Stake and Proof of Work as consensus distribution algorithms on the network. In this method, a balance between miners and voters (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).
Immutability
Once a transaction is written onto the blockchain, no one can change it, or, at least, it would be extremely difficult to change it. This immutability, or ‘unchanging over time‘ feature makes the blockchain useful for accounting, financial transactions, identity management, and asset ownership, management and transfer, just to name a few examples.
Initial Coin Offerings (ICOs)
An Initial Coin Offering (ICO) is an offering of a token – with zero ownership stake – to the public. It’s kind of like crowd-funding. It is used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks. ICOs (Initial Coin Offerings) have become a popular way to fund cryptocurrency projects. An unregulated means by which funds are raised for a new cryptocurrency venture. There is no fiduciary duty. It is often raised on the basis of speculation or enthusiasm and without anything actually built yet.
Litecoin
Litecoin is a peer-to-peer cryptocurrency based on the Scrypt proof-of-work network. Sometimes referred to as the silver of bitcoin’s gold.
Merkle trees
Merkle trees are used to summarize all the transactions in a block, producing an overall digital fingerprint of the entire set of transactions, providing a very efficient process to verify whether a transaction is included in a block.”
Mining
Mining is the process by which transactions are verified and added to a blockchain. This process of solving cryptographic problems using computing hardware also triggers the release of cryptocurrencies. Mining is the act of validating blockchain transactions. The necessity of validation warrants an incentive for the miners, usually in the form of coins. In this cryptocurrency boom, mining can be a lucrative business when done properly. By choosing the most efficient and suitable hardware and mining target, mining can produce a stable form of passive income.
Multi-Signature
Multi-signature (multisig) addresses allow multiple parties to require more than one key to authorize a transaction. The needed number of signatures is agreed at the creation of the address. Multi signature addresses have a much greater resistance to theft.
Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction.
Node
A node is any computer that connects to the blockchain network. A copy of the ledger operated by a participant of the blockchain network.
A full node is a node that fully enforces all of the rules of the blockchain.
Oracles
Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.
Peer to Peer
Peer to Peer (P2P) refers to the decentralized interactions between two parties or more in a highly-interconnected network. Participants of a P2P network deal directly with each other through a single mediation point. i.e they are directly connected to each other via the Internet, without a central server.
Permissioned blockchains
Permissioned blockchains provide highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties.
Private Key
A private key is a string of data that allows you to access the tokens in a specific wallet. They act as passwords that are kept hidden from anyone but the owner of the address.
Public Address
A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys.
Proof of Stake
A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold. The more you invest in the coin, the more you gain by mining with this protocol.
Proof of Work
A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity. The more ‘work’ you do or the more computational power you provide, the more coins you are rewarded with. Bitcoin and Ethereum use Proof of Work.
Protocols
Protocols are sets of formal rules describing how to transmit or exchange data, especially across a network.
Ripple
Ripple is a payment network built on distributed ledgers that can be used to transfer any currency. The network consists of payment nodes and gateways operated by authorities. Payments are made using a series of IOUs, and the network is based on trust relationships.
Scrypt
Scrypt is a type of cryptographic algorithm and is used by Litecoin. Compared to SHA256, this is quicker as it does not use up as much processing time.
SHA-256
SHA-256 is a cryptographic algorithm used by cryptocurrencies such as Bitcoin. However, it uses a lot of computing power and processing time, forcing miners to form mining pools to capture gains.
Smart Contracts
Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network. Furthermore, a smart contract within the blockchain may allow automatic execution of transactions upon meeting predefined criteria.
Smart contracts are simply computer programs that execute predefined actions when certain conditions within the system are met. Smart contracts provide the language of transactions that allow the ledger state to be modified. They can facilitate the exchange and transfer of anything of value (e.g. shares, money, content, property).
Soft Fork
A soft fork differs from a hard fork in that only previously valid transactions are made invalid. Since old nodes recognize the new blocks as valid, a soft fork is essentially backward-compatible. This type of fork requires most miners upgrading in order to enforce, while a hard fork requires all nodes to agree on the new version.
Solidity
Solidity is Ethereum’s programming language for developing smart contracts.
Testnet
A test blockchain used by developers to prevent expending assets on the main chain.
Tokens (application-specific tokens)
These application-specific tokens, or app-tokens, are built on top of existing general-purpose blockchains like Bitcoin and Ethereum. For funding the project, these cryptocurrency tokens are sold in an ICO event to early adopters and enthusiasts in exchange for money. ICOs provide a way for cryptocurrency project creators to raise money for their operations. For the first time, open-source project creators can directly monetize their open-source network. In the blockchain and cryptocurrency landscape, a company can issue a token which will be useful only for transacting in that company’s ecosystem.
Transaction Block
A collection of transactions gathered into a block that can then be hashed and added to the blockchain. It has the record of an event, cryptographically secured with a digital signature, that is verified, ordered, and bundled together into blocks, form the transactions in the blockchain
Transaction Fee
All cryptocurrency transactions involve a small transaction fee. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block.
Turing Complete
Turing complete refers to the ability of a machine to perform calculations that any other programmable computer is capable of. An example of this is the Ethereum Virtual Machine (EVM).
Unpermissioned ledgers
Unpermissioned ledgers such as Bitcoin have no single owner — indeed, they cannot be owned. The purpose of an unpermissioned ledger is to allow anyone to contribute data to the ledger and for everyone in possession of the ledger to have identical copies.
uPort
uPort, developed by ConsenSys, is building a secure, easy-to-use system for self-sovereign identity, built on Ethereum. The uPort technology consists of three main components: smart contracts, developer libraries, and a mobile app. The mobile app holds the user’s keys. Ethereum smart contracts form the core of the identity and contain logic that lets the user recover their identity if their mobile device is lost. Finally, the developer libraries are how third-party app developers would integrate support for uPort into their apps.
Wallet
A wallet is a file that contains a collection of private keys. It usually contains a software client which allows access to view and create transactions on a specific blockchain that the wallet is designed for.
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