Blockchain Technology and Industry Definitions and Explanations
Below you will find a comprehensive list of the most common terms used in the blockchain and cryptocurrency world.
An attack on the blockchain that results in a group of miners controlling over 50% of the network’s mining hashrate, a term used mostly in reference to Bitcoin.
Thus, when more than half of the computing power of a cryptocurrency network is controlled by a single entity or group, this entity or group may issue conflicting transactions to harm the network, should they have the malicious intent to do so.
An Accidental Fork happens when two or more miners find a block almost simultaneously. One chain then becomes longer than the other and the network eventually abandons the blocks that are not in the longer chain. These blocks are then classified as ‘orphaned blocks’.
Used to receive and send transactions on the network. An address is a string of alphanumeric characters, but can also be represented as a scannable QR code.
Cryptocurrency addresses are used to send or receive transactions on the network. An address usually presents itself as a string of alphanumeric characters.
An agreement ledger is distributed ledger used by two or more parties to negotiate and reach agreement.
Any digital currency alternative to Bitcoin. Some altcoins are forks of Bitcoin with minor changes, others are forks of Ethereum. Even more, some are not associated with either.
API (Application Programming Interface), is a software intermediary that helps two separate applications communicate with one another. They define methods of communication between various components.
A distributed ledger providing a durable record of agreements, commitments or statements, providing evidence (attestation) that these agreements, commitments or statements were made.
ASIC (Application Specific Integrated Circuit) are silicon chips specifically designed to do a single task. Often compared to GPUs, ASICs are specially made for mining and may offer significant power savings. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.
Bitcoin is the first decentralized, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralized issuer. The currency is based on the proof-of-work blockchain. Bitcoin was created in 2009 by “Satoshi Nakomoto,” a pseudo name for it/s creator/s, and its technology outlined by the white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
A Block is a package of data that carry permanently recorded data on the blockchain network.
A blockchain is a type of distributed (shared) ledger, where transactions are permanently recorded by appending blocks, comprised of unchangeable, digitally recorded data in packages called blocks. Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows block chains to be used like a ledger, which can be shared and accessed by anyone with the appropriate permissions. 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.
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.
Refers to the number of blocks connected together in the block chain. For example, Height 0, would be the very first block, which is also called the Genesis Block.
A form of incentive for a miner which has successfully hashed a transaction block. Block rewards can be a mixture of coins and transaction fees, depending on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined. Verification of transactions on the blockchain generates new coins in the process, and the miner is rewarded a portion of those.
A central ledger refers to a ledger maintained by a central agency.
Software that accesses the blockchain via local computer and helps to process its transactions. A client usually includes a cryptocurrency software wallet.
A coin or altcoin is a representation of digital asset value that is generated via their own independent blockchain.
The successful act of hashing a transaction and adding it to the blockchain.This happens through a process known as mining, in a proof-of-work system. Once a transaction is confirmed, it cannot be reversed or double spent. The more confirmations a transaction has, the harder it becomes to perform a double spend attack.
Achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.
A point – either in time, or defined in terms of a set number or volume of records to be added to the ledger – where peers meet to agree the state of the ledger.
An offline wallet that is disconnected from the internet at all times. Cryptocurrencies are not able to be hacked online.
Also known as tokens, cryptocurrencies represent a form of digital currency based on mathematics, where encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrencies are decentralized, therefore, operate independently of a central bank.
Cryptographic Hash Function
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.
A method for securing communication using code. The main example of cryptography in cryptocurrency is the symmetric-key cryptography used in the Bitcoin network. Bitcoin addresses generated for the wallet have matching private keys that allow for the spending of the cryptocurrency. The corresponding public key coupled with the private key allows funds to be unlocked. This is one example of cryptography in action.
A decentralized application (Dapp) is an application that is open source, operates autonomously, has its data stored on a blockchain, incentivized in the form of cryptographic tokens and operates on a protocol that shows proof of value.
Decentralised Autonomous Organizations (DAO) can be seen as corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules. DAO’S are built on the Ethereum blockchain as open source.
The transfer of authority and responsibility from a centralized organization, government, or party to a distributed network.
Decentralized Application (DApp)
An open source, trustless software application with the backend code running on a decentralized peer-to-peer network rather than a centralized server.
This refers to how easily a data block of transaction information can be mined successfully.
A digital commodity is a scarce, electronically transferrable, and intangible, with a market value.
A digital identity is an online or networked identity adopted or claimed in cyberspace by an individual, organization, or electronic device.
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.
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. They are a type of database that are spread across multiple sites, countries or institutions. Records are stored one after the other in a continuous ledger.
A type of network where processing power and data are spread over the nodes rather than having a centralized data center.
Generated by public key encryption, a digital signature is a code attached to an electronically transmitted document to verify its contents.
Difficulty, in Proof-of-Work mining, is how hard it is to verify blocks in a blockchain network. In the Bitcoin network, the difficulty of mining adjusts verifying blocks every 2016 blocks. This is to keep block verification time at ten minutes.
Double spending occurs when a sum of money is spent more than once. In the Bitcoin network this takes place when someone tries to send a bitcoin transaction to two different recipients at the same time. The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.
ERC20 Token Standard
Stands for Ethereum Request for Comment followed by the assignment number. A technical standard for smart contracts the majority of Ethereum tokens follow. Essentially a list of rules an Ethereum token has to implement to be compliant and function within the Ethereum network.
ERC721 Token Standard
A non-fungible Ethereum token standard. Non-fungible meaning that the token standard is used to represent a unique digital asset that is not interchangeable.
ERC223 Token Standard
A token standard with a focus on security that allows token transfers to act as ETH transactions, using event handling (transaction management) to prevent lost tokens. This standard is an improvement on the ERC20 critical bug.
Ether is the integral element (i.e. native currency) of the Ethereum Blockchain network. Ether functions as a fuel of the Ethereum ecosystem. Ether acts as a medium of incentive or form of payment for the network participants to execute their requested operations on the network.
A blockchain-based decentralized platform for apps that run smart contracts, and is aimed at solving issues associated with censorship, fraud and third party interference. It is an open software platform where developers contribute to the value of ETH cryptocurrency ecosystem. Ethereum is a public blockchain network.
EVM (Ethereum Virtual Machine)
Turing complete and allows anyone, anywhere to execute arbitrary EVM Byte Code. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.The project is designed to prevent denial-of-service attacks. It is home to smart contracts based on the Ethereum blockchain.
Platform to buy and sell cryptocurrency. The exchange charges fees in many cases for transactions, withdrawals, or deposits. Exchanges are a means to link your fiat funds to a location where you can purchase cryptocurrency. There are centralized exchanges for cryptocurrency like Coinbase and there are decentralized exchanges that do not have a central authority.
Government-issued currency. Ex: USD, EUR, CNY, JPY
A fork creates an alternative version of a blockchain. The two chains run simultaneously on different parts of the network. A fork can be either accidental or intentional.
The first or first few blocks of a blockchain.
A way to measure computational steps necessary for a transaction on the Ethereum network that then equates to a fee for network users. More intensive actions require more gas.
The very first block in a block chain.
A function that takes an input and outputs an alphanumeric string known as the “hash value” or “digital fingerprint”. The hash is used to confirm coin transactions on the blockchain. Each block in the blockchain contains the hash value that validated the transaction before it and its own hash value.
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.
A rule change in the validation process that makes the blocks validated according to the new rules incompatible and invalid. This type of fork requires all nodes and users to upgrade to the latest version of the protocol software.
The act of performing a hash function on the output data. This is used for confirming coin transactions.
A physical device like the famed Ledger Wallet that can be connected to the web and interact with online exchange, but can also be used as cold storage.
The number of hashes that can be performed by a bitcoin miner in a given period of time (usually a second). The measurement of performance for a mining rig is expressed in hashes per second.
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).
A wallet that is directly connected to the internet at all times. For this reason, hot wallets are considered to have lower security than a cold storage system or hardware wallet.
An inability to be altered or changed over time. This refers to a ledger’s inability to be changed by a single administrator, all data once written onto a blockchain can be altered.
Initial Coin Offering (ICO)
An event in which a new cryptocurrency sells advance tokens from its overall coinbase, in exchange for upfront capital. ICOs are frequently used for developers of a new cryptocurrency to raise capital.
Initial Token Offering (ITO)
Similar to ICOs (initial coin offerings), but different in that not every blockchain project that is tokenized has developed a new coin. A project built on the Ethereum network that is tokenized using ETH would be considered an ITO, the project isn’t launching a new coin, just a new application on an established coin platform.
Helps to reverse and repair the damages related to hacking or a catastrophic bug on a blockchain.
InterPlanetary File System (IPFS)
Distribution protocol that started as an open source project at Interplanetary Networks. The p2p method of storing and sharing hypermedia in a distributed file system aims to help applications run faster, safer and more transparently. IPFS allows objects to be exchanged and interact without a single point of failure. IPFS creates trustless node interrelations.
An append-only record store, where records are immutable and may hold more general information than financial records.
The availability of assets as determined by the ability for that asset to be converted into cash without dramatically affecting market prices.
A peer-to-peer cryptocurrency based on the Scrypt proof-of-work network. Sometimes referred to as the silver of bitcoin’s gold. Litecoin was an early bitcoin spinoff or altcoin, founded by Charlie Lee in October 2011. Litecoin was a fork of the Bitcoin Core client, differing primarily by having a decreased block generation time (2.5 minutes), increased maximum number of coins, different hashing algorithm (Scrypt, instead of SHA-256).
Commonly associated with the website CoinMarketCap in the crypto community, a market cap is the total value held in a cryptocurrency. The website lists nearly all cryptocurrencies’ market caps and serves as a major point of reference for investors.
The process of validating blockchain transactions. This process of solving cryptographic problems using computing hardware also triggers the release of cryptocurrencies. Validation provides the incentive of coins earned for the miners. Miners can produce a consistent income by utilizing the right hardware and targeting specific coins.
Multi-signature addresses provide an added layer of security by requiring 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.
A copy of the ledger operated by a participant of the blockchain network. Most nodes are not full nodes and full nodes can be difficult to run due to their bulky size.
Node (Full Node)
A program that can fully validate transactions and blocks bolstering the p2p network.
Work as a bridge between the real world and the blockchain by providing data to the smart contracts.
Non-Fungible Token (NFT)
A special type of cryptographic token that is a representation of a unique digital asset that is not interchangeable. This is in contrast to cryptocurrencies like Bitcoin, and many network or utility tokens that are fungible in nature.
A currency minted off-ledger and used on-ledger. An example of this would be using distributed ledgers to manage a national currency.
A currency minted on-ledger and used on-ledger. An example of this would be the cryptocurrency, Bitcoin.
An Oracle helps communicate data using smart contracts connecting the real world and blockchain. The oracle finds and verifies events and gives this information to the smart contract on the blockchain.
Peer to Peer (P2P)
Refers to the decentralized interactions that happen between at least two parties in a highly interconnected network. P2P participants deal directly with each other through a single mediation point.
An actor who can access the ledger: read records or add records to.
An actor that shares responsibility for maintaining the identity and integrity of the ledger.
A permissioned ledger is a ledger where actors must have permission to access the ledger. Permissioned ledgers may have one or many owners. When a new record is added, the ledger’s integrity is checked by a limited consensus process. This is carried out by trusted actors — government departments or banks, for example — which makes maintaining a shared record much simpler that the consensus process used by un-permissioned ledgers. Permissioned block chains provide highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties. A permissioned ledger is usually faster than an un-permissioned ledger.
A combination of Proof of Stake (PoS) and Proof of Work (PoW) consensus protocols on a blockchain network. Blocks are validated from not only miners, but also voters (stakeholders) to form a balanced network governance.
A closed network where blockchain permissions are held and controlled by a centralized entity. Read permissions are subject to varying levels of restriction.
A currency issued by a private individual or firm, typically secured against uninsured assets.
A string of data that shows you have access to bitcoins in a specific wallet. Private keys can be thought of as a password; private keys must never be revealed to anyone but you, as they allow you to spend the bitcoins from your bitcoin wallet through a cryptographic signature.
A consensus mechanism in a private blockchain that grants a single private key the authority to generate all of the blocks.
An alternative to the proof-of-work system, in which your existing stake in a cryptocurrency (the amount of that currency that you hold) is used to calculate the amount of that currency that you can mine.The more you invest in the coin, the more you gain by mining with this protocol.
Proof of Work
A system that ties mining capability to computational power 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.
When a block is successfully hashed, the hashing must have taken some time and computational effort. Thus, a hashed block is considered proof of work.
A set of rules that dictate how data is exchanged and transmitted. This pertains to cryptocurrency in blockchain when referring to the formal rules that outline how these actions are performed across a specific network.
Verifiers that provide proof that results are fair, commonly used in association with blockchain-based gaming applications.
A globally public network where anyone participate in transactions, execute consensus protocol to help determine which blocks get added to the chain, and maintain the shared ledger.
A public address is the cryptographic hash of a public key. They act as email addresses that can be published anywhere, unlike private keys.
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.
Obtained and used by anyone to encrypt messages before they are sent to a known recipient with the correct matching private key for decryption. By pairing a public key with a private key trustless transactions are possible. The public key converts the message in to an unreadable format and the corresponding private key makes it readable again for the intended party.
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.
A ledger with one master (authoritative) copy of the data, and many slave (non-authoritative) copies.
A Satoshi refers to the smallest unit of the Bitcoin cryptocurrency 0.00000001 BTC. Named after the creator of the Bitcoin protocol Satoshi Nakamoto.
An individual or individulas who created the Bitcoin protocol having successfully solved the digital currency issue of the ‘double spend’. Nakamoto first published his paper describing the project in 2008 and the first bitcoin software was released one year later.
A change in the size or scale to handle the network’s demands. This word is used to refer to a blockchain project’s ability to handle network traffic, future growth and capacity in its intended application.
An alternative proof of work system to SHA-256, designed to be particularly friendly to CPU and GPU miners, while offering little advantage to ASIC miners. Compared to SHA256, this is quicker as it does not use up as much processing time.
The cryptographic function used as the basis for bitcoin’s proof of work system. However, it uses much computing power and processing time, forcing miners to form mining pools to capture gains.
Contracts whose terms are recorded in a computer language instead of legal language. Smart contracts can be automatically executed by a computing system, such as a suitable distributed ledger system.
Differs from a hard fork in that only previously valid transactions are made invalid. A rule change that creates blocks recognized as valid by the old software but not the new that can result in a potential divide in the blockchain as the old software generates blocks seen as invalid according to the new rules.
Ethereum’s programming language for developing smart contracts.
Any cryptocurrency pegged to a stable asset, like fiat or gold. It theoretically remains stable in price as it is measured against a known amount of an assets not subject to change.
A test blockchain used by developers to prevent expending assets on the main chain.
A collection of transactions gathered into a block that can then be hashed and added to the blockchain.
A Token represents an asset built on an existing blockchain (different from a coin).
A tokenless ledger refers to a distributed ledger that doesn’t require a native currency to operate.
A collection of transactions on the bitcoin network, gathered into a block that can then be hashed and added to the blockchain.
All cryptocurrency transactions involve a small transaction fee. These transaction fees are awarded to the miner/s that successfully hashes a block containing the relevant transaction.
Any machine that can calculate on a level equal to a programmable computer is Turing Complete or computationally universal. An example of this is the Ethereum Virtual Machine (EVM).
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. This creates censorship resistance, which means that no actor can prevent a transaction from being added to the ledger. Participants maintain the integrity of the ledger by reaching a consensus about its state
A file that houses private keys for cryptocurrencies.The file is a designated storage location for digital assets that has an address used for sending and receiving funds to and from the wallet. The wallet can be online, offline, or on a physical device.
An authoritative report or proposal that is used in the web 3.0 community as an integral marketing tool to attract investors, educate the public about the project, and present to venture capital firms. Almost every ICO or ITO has a whitepaper on their website that is essentially an informative sales pitch.
Formerly known as Ripple, XRP is the native cryptocurrency for the Ripple distributed ledger payment network. XRP acts as a bridge currency to other currencies. Ripple operates on an open source and peer-to-peer decentralized platform that allows for a seamless transfer of money in any form, whether fiat or cryptocurrency.