A BLOCKCHAIN GLOSSARY FOR BEGINNERS

Blockchain terminology can be a feat to figure out, especially if you’re in the early stages of

exploration. Here’s a blockchain lingo guide to help you navigate the exciting frontier of Web3.

A

Address (Wallet Address)

Used to send and receive transactions on a blockchain network. An address is an alphanumeric character string, which can also be represented as a scannable QR code.

Airdrop

A token distribution method used to send cryptocurrency or tokens to wallet addresses. Sometimes airdrops are used for marketing purposes in exchange for simple tasks like reshares, referrals, or app downloads.

Air-gapping

A method for securing computers in which the device does not connect to the internet or any other open networks.

Altcoin

Any digital currency alternative to Bitcoin. Many altcoins are forks [see below for definition] of Bitcoin with minor changes (e.g., Litecoin).

AML (Anti-Money Laundering)

Anti-Money Laundering. A set of international laws enacted to diminish the potential for criminal organizations or individuals to launder money through cryptocurrencies.

API (Application Programming Interface)

Application Programming Interface. A software intermediary that allows two separate applications to communicate with one another. APIs define methods of communication between various components.

ASIC (Application Specific Integrated Circuit)

Application Specific Integrated Circuit. ASICs are silicon chips designed to do a specific task. In ASIC use for mining cryptocurrencies, the ASIC will perform a calculation to find values that provide a desired solution when placed into a hashing algorithm.

B

Bitcoin (BTC)

The first cryptocurrency based on the Proof of Work blockchain. Bitcoin was created in 2009 by Satoshi Nakomoto — a pseudonym for an individual whose real identity is unknown — and the concept of cryptocurrency was outlined in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”

Blockchain

A consensus digital ledger comprised of unchangeable, digitally recorded data in packages called blocks. Each block is ‘chained’ to the next block using a cryptographic signature. This allows blockchains to act like a ledger, which can be shared with and accessed by anyone with the appropriate permissions. Click here to learn more about blockchain.

Block Height

The number of blocks connected together in the blockchain. For example, Height 0 would be the very first block, which is also called the Genesis Block.

Block Reward

The reward given to a miner after it has successfully hashed a transaction block. Block rewards can be a mixture of coins and transaction fees. The composition depends on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined. The current block reward for the Bitcoin network is 12.5 bitcoins per block.

Bounty / Bug Bounty

A reward that’s paid for the completion of a given task. Tasks include identifying code vulnerabilities, creating content, design work, research, translations, social impact and more.

C

Client

Software that accesses a blockchain via a local computer and helps to process transactions. A client usually includes a cryptocurrency software wallet.

Coin

A coin or altcoin is a representation of digital asset value that is generated via their own independent blockchain.

Cold Wallet / Cold Storage

An offline wallet that is never connected to the internet. These wallets protect cryptocurrencies from getting hacked online.

Confirmation / Block Confirmation

A confirmation means that the network has verified the blockchain transaction. This happens through a process known as mining, in a Proof of Work system (e.g., Bitcoin). Once a transaction is successfully confirmed it theoretically cannot be reversed or double spent. The more confirmations a transaction has, the harder it becomes to perform a double spend attack.

Consensus

The process used by a group consisting of peers that is responsible for maintaining distributed ledger use. The way to reach consensus on the use of the ledger’s contents.

Cryptocurrency

Digital currency that is based on mathematics and uses encryption techniques to regulate the creation of units of currency as well as verifying the transfer of funds. Cryptocurrencies operate independently of a central bank.

Cryptography

A method for secure communication using code. Symmetric-key cryptography is used by various blockchain networks for transfer of cryptocurrencies. Blockchain addresses generated for wallets are paired with private keys that allow transfer of cryptocurrency. Paired public and private keys allow funds to be unlocked.

D

DAO (digital decentralized autonomous organization)

Also known as the digital decentralized autonomous organization (DAO). Alternatively, the first known example of a DAO was named The DAO. The DAO served as a form of investor-directed venture capital fund, which sought to provide enterprises with new decentralized business models. Ethereum-based, The DAO’s code was open source. The organization set the record for the most crowdfunded project in 2016, however, those funds were partially stolen by hackers. The hack caused an Ethereum hard-fork which lead to the creation of Ethereum Classic.

Decentralization

The transfer of authority and responsibility from a centralized organization, government, or party to a distributed network.

Decentralized Application (dapp)

An open-source, software application with backend code running on a decentralized peer-to-peer network rather than a centralized server.

Decentralized Finance (DeFi)

Decentralized finance — often called DeFi or open finance — refers to the economic paradigm shift enabled by decentralized technologies, particularly blockchain networks. DeFi represents a shift from a centralized and closed financial system to a universally accessible economy that is based on open protocols that are interoperable, programmable, and composable.

Deposit

Digital property is put into a contract involving a different party such that if certain conditions are not satisfied that property is automatically forfeited to the identified counterparty.

Digital Asset

A digital commodity that is scarce, electronically transferable, and intangible with a market value.

Digital Identity

An online or networked identity is adopted by an individual, organization, or electronic device.

Digital Signature

A code generated by public-key encryption and attached to an electronically transmitted document in order to verify the contents of the document.

Distributed Denial of Service (DDoS) Attack

A type of cyber-attack in which the perpetrator continuously overwhelms the system with requests in order to prevent the service of legitimate requests.

Distributed Ledger

A type of database that spreads across multiple sites, countries, or institutions. Records are stored sequentially in a continuous ledger. Distributed ledger data can be either “permissioned” or “unpermissioned” to control who can view it.

Difficulty

The concept outlines how hard it is to verify blocks in a blockchain network during Proof of Work mining. In the Bitcoin network, the difficulty of mining adjusts alters blocks every 2016 block. This is to keep block verification time at ten minutes.

Double Spend

The event during which someone in the Bitcoin network tries to send a specific bitcoin transaction to two different recipients at once. However, each bitcoin transaction is confirmed it becomes almost impossible to double spend it. The more confirmations that a particular transaction has, the decreased likelihood of double spending the bitcoin from the transaction.

E

Enterprise Ethereum Alliance (EEA)

A group of Ethereum core developers, startups, and large companies working together to commercialize and use Ethereum for different business applications.

EIP (Ethereum Improvement Proposals)

Ethereum Improvement Proposals (EIPs) describe standards for the Ethereum platform, including core protocol specifications, client APIs, and contract standards.

Encryption

A process used to combine a document (plaintext) with a shorter string of data referred to as “a key” in order to produce an output (ciphertext). This output can be “decrypted” back into the original plaintext by someone else who has the key.

ERC20 Token Standard

ERC is the abbreviation for Ethereum Request for Comment and is followed by the assignment number of the standard. ERC20 is a technical standard for smart contracts the majority of Ethereum tokens follow.

This list of rules states the requirements that a token must fulfill to be compliant and function within the Ethereum network.

ERC721 Token Standard

A non-fungible Ethereum token standard. This token standard is used to represent a unique digital asset that is not interchangeable.

Ether (ETH)

Ether is the native currency of the Ethereum blockchain network. Ether — also referred to as ETH — functions as a fuel of the Ethereum ecosystem by acting as a medium of incentive and form of payment for network participants to execute essential operations.

Ethereum

A public blockchain network and decentralized software platform upon which developers build and run applications.

EVM (Ethereum Virtual Machine)

The Ethereum Virtual Machine (EVM) is Turing complete and allows anyone, anywhere to execute arbitrary EVM Byte Code. All Ethereum nodes run on the EVM. The project is designed to prevent denial-of-service attacks. It is home for smart contracts based on the Ethereum blockchain.

Exchange

A place to trade cryptocurrency. Centralized exchanges, operated by companies like Coinbase and Gemini, function as intermediaries, whie decentralized exchanges do not have a central authority.

F

Fiat Currency

Government-issued currency. For example: US Dollars (USD), Euros (EUR), Yuan (CNY), and Yen (JPY)

Fork

A fork creates an alternative version of a blockchain, and are often enacted intentionally to apply upgrades to a network. Soft Forks render two chains with some compatibility, while Hard Forks create a new version of the chain that must be adopted to continue participation. In the instance of a contentious Hard Fork, this can create two versions of a blockchain network.

G

Gas

A measure of the computational steps required for a transaction on the Ethereum network that then equates to a fee for network users paid in small units of ETH specified as Gwei.

Genesis Block

The initial block of data is computed in the history of a blockchain network.

Gwei

A minuscule and common denomination of ETH, and the unit in which gas prices are often specified.