Glossary of Blockchain and Cryptocurrency
An attack that can take place on any blockchain in which a bad actor seizes majority control over the consensus mechanism of the network. This opens up a window of opportunity for the bad actor to write and reverse records, or deny service altogether in real time.
Blockchain addresses can be any identifier chosen by the developers, and are used to facilitate the origination and destination of transactions. They are typically represented as a cryptographic hash. In Bitcoin's early days the address for receiving and sending Bitcoin could be a simple IP address, which laid a path for Man in the Middle attacks and was deprecated.
Acronym for "Application Specific Integrated Circuit". ASICs are specialized computing hardware utilized to perform platform specific tasks more efficiently than traditional computers. Cryptocurrency specific ASICs are engineered to compute a consensus algorithm specific to the Proof of Work blockchain it's being used for in order to more efficiently earn rewards compared to the other miners on the network.
Bitcoin is an innovative, global, peer to peer payment network developed and managed on decentralized blockchain technology. It is the first cryptocurrency in the world and is also the first secure implementation of the Internet of Value.
A block is a container data structure used in blockchains to permanently record data. It is composed of a header and list of transactions. In short, it's a batch of transactions.
Blockchains are distributed ledgers where transactions are stored in batches called "blocks", and then permanently stored in chronological order with cryptography. A blockchain typically contains a genesis block, candidate blocks, peer nodes, smart contracts, object storage, and a consensus algorithm.
A block explorer is a platform specific blockchain web interface that enables users to explore network and transaction data in real time. Typical insights include transaction costs, transaction verification, block heights, hash rates, mining difficulty, and transaction speed.
A block header contains all of the necessary metadata for a block of transactions in order to validate, summarize, and link it to the previous block. This metadata includes consensus validation, a merkle tree root, and reference data to the previous block.
Block height is the total cumulative number of blocks appended permanently to a blockchain since it's genesis block was created.
Block rewards are economic incentives that decentralized blockchains use to promote integrity among participants securing and processing the blocks on the network. Rewards are distributed based on criteria specific to each blockchain and are generated by sending existing pre-mined cryptocurrency, or through the creation of the cryptocurrency upon issuance of the reward.
The process of consolidating ownership, resources, and functionality under a single authority. Centralized blockchain platforms include IBM's Hyperledger.
A confirmation is the successful addition of a transaction included in a permanently appended block. Each confirmation is equal to another block being written to the blockchain. The more confirmations a transaction contains, the more likely it is to be an immutable record.
Consensus is the process of all peers in a blockchain agreeing on the validity, state, and organization of transactions on a blockchain. Consensus ensures that every peer utilizing the blockchain has the exact same universally trusted record over time.
Cryptocurrency is a purely digital representation of currency that utilizes cryptographic security measures to validate it's existence and value.
Cryptographic Hash Function
A function which takes an input and returns a fixed-size alphanumeric string that is often called it's hash value, checksum, or digital signature. These functions are used within consensus algorithms, linking blocks, batching transactions, creating unique addresses, and more within blockchain software.
A 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.
Decentralised 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.
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.
A type of network where processing power and data are spread over the nodes rather than having a centralised data centre.
This refers to how easily a data block of transaction information can be mined successfully.
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 spending occurs when a sum of money is spent more than once.
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.
The Ethereum Virtual Machine (EVM) is a Turing complete virtual machine that allows anyone to execute arbitrary EVM Byte Code. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.
Forks create 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.
The act of performing a hash function on the output data. This is used for confirming coin transactions.
Measurement of performance for the mining rig is expressed in hashes 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 (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).
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 addresses provide an added layer of security by requiring more than one key to authorize a transaction.
A copy of the ledger operated by a participant of the blockchain network.
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.
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.
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.
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 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 encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network.
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 is Ethereum’s programming language for developing smart contracts.
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.
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 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 houses 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.
Kyle May | 5/22/2018