A Glossary of Key Blockchain and Cryptocurrency Terms
An address is usually a string of alphanumeric characters which are used to send or receive transactions on the network.
A cryptocurrency that works similarly to Bitcoin but with modifications such as being able to process transactions faster.
Short form for ‘Application Specific Integrated Circuit’. Often compared to GPUs, ASICs are silicon chips specially made for mining. With Bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins and may offer significant power savings.
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.
Blocks are files where data relating to a crypto currency’s network is permanently recorded. A block records the most recent transactions that have not yet entered any prior blocks. Thus, a block is like a page of the ledger. Each of the blocks is created using a special algorithm linking each blockchain to the next.
Blockchain is a distributed ledger (database of records) secured by cryptographic keys which serves as a historical record of all transactions that ever occurred.
The number of blocks connected on the blockchain.
An amount of crypto-currency that a miner receives as reward for successfully calculating the hash in a block during mining. Mining is crucial for generating new coins and a portion of mined coins are given to those who perform this function to encourage them.
The successful act of hashing a transaction and adding it to the blockchain.
Consensus is achieved when all participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other.
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 decentralized application (Dapp) is an application that is open source, operates autonomously, and has no entity controlling the majority of its tokens.
Decentralized Autonomous Organizations can be thought of as corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules.
A system for creating a shared, cryptographically secured database. The most common is a blockchain.
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. The signature ensures that only the owner of the account can move money or assets out of the account.
Ethereum is an open-source, public, blockchain-based distributed computing platform and the first blockchain to feature smart contract (scripting) functionality.
The creation of an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network.
The first or first few blocks of a blockchain.
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.
A cryptography tool that turns any input into a string of characters that serves as a virtually unforgeable digital fingerprint of the data, called a hash.
Initial Coin Offering (ICO)
A blockchain-based fund-raising mechanism in which entrepreneurs mint new crypto-tokens and sell them to investors.
The measurement of hashes that can be performed by a mining rig per second.
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 may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).
The process of solving cryptographic problems using computing hardware that triggers the release of cryptocurrencies. Transactions are verified and added to a blockchain through mining.
Multi-signature addresses allow multiple parties to require more than one key to authorize a transaction. This provides an added layer of security.
A node is any computer that connects to the blockchain network.
Peer to Peer
Peer to Peer (often written 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.
Permissioned blockchains use an access control layer to govern who has access to the network. In contrast to public blockchain networks, validators on private blockchain networks are vetted by the network owners.
Permissionless, or public blockchain network allow for applications to be added to the network without the approval of others, using the blockchain as a transport layer. Anyone in the world can send transactions through the network and expect to see them included in the blockchain if they are valid, and also validate other participant’s transactions.
A private key is a string of data that shows you have access to tokens in a specific wallet. They are like passwords that should not be shared with others.
Proof of Stake
A consensus protocol in which, instead of mining, nodes can validate and make changes to the blockchain based on the number of coins they own or hold.
Proof of Work
A consensus distribution algorithm that ties mining capability to computational power. The more computational power you provide, the more coins you are rewarded with.
Scrypt is a type of cryptographic algorithm designed to be particularly friendly to CPU and GPU miners. Compared to SHA256, Scrypt is quicker as it does not use up as much processing time.
SHA-256 is a cryptographic algorithm used as the basis for bitcoin’s proof of work system. It uses a lot of computing power and processing time.
Contracts whose terms are recorded in a computer language instead of legal language. Smart contracts encode business rules in a programmable language and serve as a way to create a mathematically guaranteed promise between two parties. They can be automatically executed by a computing system, such as a suitable distributed ledger system.
A change to the bitcoin protocol wherein only previously valid blocks/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.
Ethereum’s programming language for developing smart contracts.
A digital identity for something that can be owned.
Small fees imposed on transactions sent across the bitcoin network. These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block containing the relevant transaction.
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).
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.