Blockchain glossary

A

Address

A cryptographic hash representing a destination for a cryptocurrency transaction, usually a string of alphanumeric characters. It is the equivalent of an account number and is used to receive and send cryptocurrency tokens and coins.

Altcoin

Any cryptocurrency other than Bitcoin, representing alternatives to the original blockchain-based digital currency. Examples include Ethereum, Litecoin, and Ripple.

Airdrop

A marketing strategy involving the distribution of tokens or coins directly to users’ wallets, usually for free or in exchange for small tasks. It aims to create awareness and encourage participation in a new cryptocurrency project.

Arbitrage

The simultaneous buying and selling of assets in different markets or exchanges to capitalize on differing prices for the same asset, allowing traders to profit from price discrepancies.

ASIC (Application-Specific Integrated Circuit)

A specialized piece of hardware designed to perform a specific task, in this case, cryptocurrency mining, with optimal efficiency and performance.

Attestation Ledger

A secure and immutable ledger that provides verifiable proof of the existence and state of a transaction or data at a specific point in time.

B

Blockchain

A secure, decentralized, and distributed ledger technology that records transactions across multiple computers, ensuring data integrity and transparency. Each block contains a list of transactions and is linked to the previous block through cryptographic hashes.

Bitcoin

The pioneering and most widely recognized cryptocurrency, introduced in 2009 by an anonymous entity known as Satoshi Nakamoto. It operates on a decentralized network of computers where transactions are recorded on a public ledger called the blockchain.

Block

A data structure containing a list of transactions and other information, which is added to the blockchain after being validated by network participants. Each block is linked to the preceding block, forming a chain of blocks.

Block Reward

A reward allocated to miners for validating and adding a new block of transactions to the blockchain. It typically consists of newly minted coins and transaction fees.

Byzantine Fault Tolerance (BFT)

A property of a distributed network that enables it to reach consensus and continue functioning correctly even when some of its nodes fail or act maliciously.

C

Cryptocurrency

A form of digital or virtual currency that utilizes cryptography for security, enabling secure, anonymous transactions. Cryptocurrencies operate on decentralized networks based on blockchain technology.

Cold Wallet

A secure method for storing cryptocurrency offline, such as hardware or paper wallets, protecting the assets from unauthorized access, cyber hacks, and other vulnerabilities associated with internet connectivity.

Consensus Algorithm

A protocol used in blockchain networks for nodes to agree on the state of the ledger. It ensures that all participants have a consistent view of the transaction history, preventing double-spending and other types of fraud.

Contract Account

A type of account on the Ethereum blockchain that contains smart contract code and is controlled by that code, allowing it to send and receive Ether and interact with other contracts autonomously.

Crypto Exchange

An online platform that facilitates the buying, selling, and trading of various cryptocurrencies. Exchanges can be centralized or decentralized and often offer additional services like wallet storage and market analysis.

D

Decentralized Application (dApp)

A software application that runs on a decentralized network, typically a blockchain, eliminating the need for a central authority or intermediary to manage and control user data and interactions.

Decentralized Finance (DeFi)

A subset of the blockchain industry that leverages decentralized networks to transform traditional financial products into trustless and transparent protocols that operate without intermediaries.

Digital Signature

A cryptographic technique enabling individuals to authenticate and verify digital messages or documents, ensuring the integrity and origin of the message.

Distributed Ledger Technology (DLT)

A consensus of replicated, shared, and synchronized digital data spread across multiple sites, countries, or institutions, providing a single common view of the ledger.

E

Ethereum

An open-source, blockchain-based platform that enables developers to build and deploy smart contracts and decentralized applications. It has its own native cryptocurrency called Ether (ETH).

ERC-20

A widely adopted technical standard for Ethereum tokens, allowing for the implementation of a standard API for tokens within smart contracts, ensuring interoperability across different applications and interfaces.

Exchange

A marketplace where assets like cryptocurrencies, commodities, or securities are bought, sold, and traded. Exchanges can be physical locations or electronic platforms and can be regulated or unregulated.

F

Fiat Currency

Government-issued currency that is not backed by a physical commodity like gold or silver but derives its value from the trust and acceptance of the people who use it.

Fork

A divergence in a blockchain that can result in two separate chains, either due to a change in protocol rules (hard fork) or a temporary divergence resolved by subsequent blocks (soft fork).

Fungible

A characteristic of an asset where individual units are interchangeable and indistinguishable from each other, like currency or identical commodities.

G

Gas

A unit of measure representing the computational effort required to execute operations on the Ethereum network, such as making transactions or running decentralized applications.

Genesis Block

The inaugural block in a blockchain, serving as the foundation for the network and containing the initial state and configuration of the system.

GPU Mining

The use of Graphics Processing Units (GPUs) to solve complex mathematical problems and validate transactions on the blockchain, earning rewards for the miner.

Governance Token

A token granting holders the right to vote on decisions and changes to a protocol or platform, allowing for decentralized governance and community involvement in the development of the project.

H

Halving

An event in the blockchain network where the reward for mining new blocks is halved, effectively reducing the rate at which new coins are generated. It is a deflationary mechanism used in cryptocurrencies like Bitcoin to control supply and inflation.

Hash

A cryptographic function that converts an input of any size into a fixed-size string of characters, which is typically a hexadecimal number. It is a one-way function, meaning it is infeasible to reverse the process and obtain the original input from the hash.

Hash Rate

A measure of computational power used in mining and processing transactions in a blockchain network, indicating the number of hash operations completed in a given time frame.

Hot Wallet

A cryptocurrency wallet that is connected to the internet, allowing for quick and easy access to funds but at a higher risk compared to cold wallets due to potential online vulnerabilities.

I

ICO (Initial Coin Offering)

A fundraising mechanism where new projects sell their underlying tokens in exchange for bitcoin or ether. It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company.

Immutable

A characteristic of blockchain technology where once data is recorded, it cannot be altered or deleted, ensuring the integrity and authenticity of information.

Interoperability

The ability of different blockchain networks and systems to communicate and transact with each other, enabling the exchange of assets and information across different platforms.

J

JavaScript Object Notation (JSON)

A lightweight data-interchange format that is easy for humans to read and write and easy for machines to parse and generate. It is often used in the interaction between a browser and a server for data exchange.

K

KYC (Know Your Customer)

A process used by businesses to verify the identity of their clients, typically to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

L

Ledger

A record or database containing the transaction history and balance of each account in the blockchain network. It is maintained by all full nodes in a decentralized and immutable manner.

Liquidity

The degree to which an asset can be quickly bought or sold in the market without affecting the asset’s price. High liquidity is associated with lower transaction costs and less price volatility.

Litecoin

A peer-to-peer cryptocurrency created by Charlie Lee in 2011. It was developed based on the Bitcoin protocol but with a faster block generation time and a different hashing algorithm (Scrypt).

M

Mainnet

The main network of a blockchain project, where actual transactions take place in the native cryptocurrency, as opposed to a testnet, which is used for testing purposes.

Masternode

A server within a network that performs more advanced functions compared to regular nodes, such as enabling instant transactions and private transactions. Masternodes typically require a significant amount of collateral in the native cryptocurrency to operate.

Mining

The process by which transactions are verified and added to the blockchain. It involves solving complex mathematical problems, and in return, miners are rewarded with newly minted coins and transaction fees.

Multisignature (Multisig)

A digital signature scheme that allows a group of users to sign a single document, typically used to divide responsibility among multiple individuals or devices for enhanced security.

Minting

The process of creating new tokens or coins in a cryptocurrency network. Unlike mining, it doesn’t require computational work and is often used in Proof-of-Stake and other consensus mechanisms.

N

Node

A computer connected to the blockchain network, which validates and relays transactions. Nodes store a copy of the blockchain and are essential for maintaining the integrity and security of the network.

Nonce

A random or unique value used in cryptographic computations to protect against replay attacks and ensure that each transaction is unique.

NFT (Non-Fungible Token)

A type of digital asset representing ownership or proof of authenticity of a unique item or piece of content, such as artwork or collectibles, using blockchain technology.

O

Oracles

Entities that provide smart contracts with external information, enabling them to interact with real-world data and events. They serve as bridges between blockchains and the outside world.

Off-Chain

Transactions or actions occurring outside of the blockchain network, typically involving third-party trust and not subject to the network’s consensus mechanisms.

Open Source

Software whose source code is made freely available and may be redistributed and modified, promoting collaboration and transparency.

P

Private Key

A cryptographic key that is used to sign transactions, providing mathematical proof of ownership. It must be kept secret as it allows full access to the associated funds.

Public Key

Derived from the private key, it is used to create addresses and can be shared publicly. It allows others to send funds to the address and verify the signature of a transaction.

Proof of Stake (PoS)

A consensus algorithm where block creators are chosen based on the number of coins they hold and are willing to “stake” as collateral, rather than on their ability to solve cryptographic puzzles.

Proof of Work (PoW)

A consensus algorithm where miners compete to solve a mathematical problem, and the first one to solve it gets to add a new block to the blockchain, receiving a reward in return.

Protocol

A set of rules and standards that define how data is transmitted and received over a network. In blockchain, it refers to the rules governing how nodes communicate and validate transactions.

Q

Quorum

The minimum number of nodes required to reach consensus and validate a transaction or block in a blockchain network.

R

Replay Attack

A network attack where valid data transmission is maliciously or fraudulently repeated or delayed, potentially causing unintended effects.

Reward Halving

A scheduled event in a blockchain network where the reward for mining new blocks is halved, reducing the rate at which new coins are generated.

Ripple

Both a platform and a currency. The Ripple platform is an open-source protocol that is designed to allow fast and cheap transactions, and the Ripple currency (XRP) is the native currency used within the platform.

S

Smart Contract

Self-executing contracts with the terms of the agreement directly written into code. They run on a blockchain and automatically enforce and execute the terms of an agreement when predefined conditions are met.

Stablecoin

A type of cryptocurrency that is pegged to the value of an underlying asset, such as fiat currency or gold, to reduce volatility.

Staking

The process of actively participating in transaction validation (similar to mining) on a proof-of-stake blockchain. Users lock up their coins to serve as validators to the network and earn additional coins as rewards.

T

Token

A digital asset issued on a blockchain. Tokens can represent assets or utilities and can be used as a medium of exchange within a blockchain ecosystem.

Transaction Fee

A fee paid to miners or validators to process a cryptocurrency transaction and add it to the blockchain.

U

UTXO (Unspent Transaction Output)

The output of a transaction that a user is able to spend, functioning as individual pieces of digital currency in a transaction-based model like Bitcoin’s.

V

Validator

A participant in the network responsible for verifying transactions and reaching consensus in proof-of-stake and other consensus algorithms.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, often expressed as a variance or standard deviation.

W

Wallet

A digital tool that allows users to store, manage, and transact with their cryptocurrencies. Wallets can be hardware-based, software-based, or a combination of both.

Whale

An individual or entity that holds a large amount of a cryptocurrency, potentially having the ability to manipulate market prices.

Whitepaper

A document provided by cryptocurrency startups to explain the technical, commercial, and strategic vision of their project. It is intended to provide potential investors with a detailed overview of the project.

Y

Yield Farming

An investment strategy in decentralized finance (DeFi) where users lock up their funds in return for interest or other rewards. It involves lending assets to earn high returns, compounding those returns by leveraging various DeFi protocols.

Z

Zero-Knowledge Proof

A cryptographic method allowing one party to prove to another that they know a specific value, without conveying any information apart from the fact that they know the value.

Zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge)

A form of zero-knowledge proof that enables one party to prove possession of certain information without revealing that information. It is used to enhance privacy in blockchain networks.