Learn common blockchain technology terminology.
Our blockchain technology glossary is a complete blockchain 101 guide to help you understand this new technology by explaining commonly used terms and their meanings. Scroll down to learn more
51% AttackAn 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.
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’.
Addresses (Cryptocurrency addresses) are 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.
An agreement ledger is distributed ledger used by two or more parties to negotiate and reach agreement.
Altcoin is simply any digital currency alternative to Bitcoin. Many altcoins are forks of Bitcoin with minor changes (e.g. Litecoin).
Stands for Application Programming Interface, 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 is an acronym for “Application Specific Integrated Circuit”. ASICs are silicon chips specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.
Bitcoin BTC (uppercase)
The most well known cryptocurrency, based on the proof-of-work blockchain. Bitcoin was created in 2009 by a mysterious creator, Satoshi Nakomoto, and its technology outlined by the white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
The specific collection of technologies used by Bitcoin’s ledger, a particular solution. Note that the currency is itself one of these technologies, as it provides the miners with the incentive to mine.
A blockchain is a type of distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks (rather like collating them on to a single sheet of paper). 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.
Block height 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.
The reward given to 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. The current block reward for the Bitcoin network is 25 bitcoins for each block.
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.
An offline wallet that is disconnected from the internet at all times. Cryptocurrencies are not able to be hacked online.
A confirmation means that the blockchain transaction has been verified by the network. This happens through a process known as mining, in a proof-of-work system (e.g. Bitcoin). 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.
The process a group of peers responsible for maintaining a distributed ledger use to reach consensus on the ledger’s contents.
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.
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. Furthermore, cryptocurrencies operate independently of a central bank.
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.
(The) DAO – also known as the digital decentralized autonomous organization (DAO). The DAO served as a form of investor-directed venture capital fund that sought to provide enterprise with new decentralized business models. Built on the Ethereum blockchain, The DAO’s code was open source. The organization set the record for most crowdfunded project in 2016, however, those funds were partially stolen by hackers cause an Ethereum hard-fork that created Ethereum Classic.
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.
A digital commodity is a scarce, electronically transferrable, 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.
Generated by public key encryption, a digital signature is a code attached to an electronically transmitted document to verify its contents.
Distributed ledgers 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. Distributed ledger data can be either “permissioned” or “unpermissioned” to control who can view it.
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 spend refers to a scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recipients at the same time. However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. 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.
An open software platform where developers build and run decentralized apps that contribute to the value of ETH cryptocurrency ecosystem. Ethereum is a public blockchain network.
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 to smart contracts based on the Ethereum blockchain.
A place to buy and sell cryptocurrency. The exchange charges fees in many cases for transactions, withdrawals, or deposits. Exchanges are a way 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. They can be either accidental or intentional.
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. All nodes will need to upgrade their software to work with the new rules.
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).
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 Initial Coin Offering (also called an ICO) is 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)
Initial Token Offerings are 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 by which transactions are verified and added to a blockchain. This process of solving cryptographic problems using computing hardware also triggers the release of cryptocurrencies.
Multi-signature (multisig) addresses allow multiple parties to require 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.
Node (Full Node)
A computer connected to the blockchain network is referred to as a ‘node’. Most nodes are not full nodes and full nodes can be difficult to run due to their bulky size. A full nodeis a program can fully validate transactions and blocks bolstering the p2p network.
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 unpermissioned 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 unpermissioned ledger.
PoS/Pow Hybrid- 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 private key is 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.
A system that ties mining capability to computational power. Blocks must be hashed, which is in itself an easy computational process, but an additional variable is added to the hashing process to make it more difficult. 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.
With proof or in a provable manner.
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.
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 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 entity who created 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.
The cryptographic function used as the basis for bitcoin’s proof of work system.
Smart contracts are 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.
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.
The programming language developers use to write smart contracts on the Ethereum network.
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.
An alternative blockchain developers use to test applications.
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.
A small fee imposed on some transactions sent across the bitcoin network. The transaction fee is awarded to the miner that successfully hashes the block containing the relevant transaction.
Any machine that can calculate on a level equal to a programmable computer is Turing Complete or computationally universal.
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 designated storage location for digital assets (cryptocurrency) 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.